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Public sector banking giants – State Bank of India (SBI) and (BoB) – are to set to report their December quarter earnings (Q3FY22) on Saturday, February 5.


According to analysts, can see continued traction in their operating performance, supported by modest business growth and a gradual reduction in provisions, while BoB may see a weak Q3 earnings show. On the other hand, an increase in bond yields could impact treasury performance. Slippage is likely to subside, which would support the asset quality performance, they say.


On the bourses, the stock of and BoB have outperformed the benchmark S&P BSE Sensex, so far this year. The former has surged about 17 per cent YTD while the latter has rallied 34 per cent. In comparison, the BSE Sensex is up 0.9 per cent, BSE data shows.


Here’s what key brokerages expect:


Morgan Stanley







SBI: We expect strong sequential loan growth at 3.5 per cent quarter-on-quarter (QoQ), mainly led by the retail and SME segments. On YoY basis, loan growth should be 6.8 per cent YoY.


We expect margins to remain broadly flat QoQ at 3.06 per cent adjusted for one-off related to interest on IT refund last quarter. Net interest income, adjusted for IT refund, is likely to grow 5 per cent YoY (4 per cent QoQ) at Rs 30,351.3 crore.


BoB: We expect the bank to perform well on asset quality front with lower slippages of Rs 3,500 crore (2 per cent of loans, annualized) and moderation in credit cost to 143 bps relative to 161 bps last quarter.


Margins should remain broadly stable at 2.85 per cent QoQ as much of the uptick from lower slippages will be offset by pressure on yields. NII could grow 3 per cent YoY at Rs 7,679.5 crore.


We expect net profit of Rs 1,290 crore vs Rs 2,090 crore last quarter. Note, we have not built-in recovery from Air India exposure as yet, which we expect to be reflected in Q4FY22 at Rs 2,500 crore


Key monitorables would be slippages run-rate going forward and update on a restructured stressed retail account, which could potentially slip, as per media reports.


Nomura


SBI: We forecast loan growth at 8.1 per cent YoY and 4.8 per cent QoQ at Rs 25.6 trillion, up from Rs 23.68 trillion in Q3FY21 and Rs 24.43 trillion in Q2FY22.


Basis this, NII growth could be at 8.1 per cent YoY and down 0.1 per cent QoQ at Rs 31,149.6 crore. Net interest margin (NIM), however, may contract to 3.02 per cent from 3.12 per cent YoY and 3.24 per cent QoQ.


Operating profit and net profit, meanwhile, are pegged at Rs 19,697.1 crore and Rs 8,609.6 crore, respectively (up 13.6 per cent YoY and 65.7 per cent YoY).


BoB: We forecast loan growth at 3.9 per cent YoY (4.6 per cent QoQ) and NII growth at 4.1 per cent YoY (2.9 per cent QoQ) at Rs 7.26 trillion and Rs 7,785.5 crore, respectively.


Operating profit is expected to decline 7.6 per cent YoY and 17.4 per cent QoQ to Rs 4,682.8 crore, while net profit is pegged at Rs 1,558 crore (vs Rs 1,061.1 crore in Q3FY21 and Rs 2,087.9 crore in Q2FY22).


We forecast slippage ratio at Rs 6,194 crore or 2.5 per cent (as % of 12m prior loans) compared to Rs 12,274 crore or 3.5 per cent in Q2FY22.


Kotak Institutional Equities


SBI: We expect operating profit growth of 14 per cent YoY, at Rs 19,796.1 crore, driven by lower operating expenses growth. We are building 9 per cent NII growth at Rs 31,505 crore, on the back of subdued loan growth at 7 per cent YoY. NIM could improve to 3.2 per cent. Treasury income could be lower and there may be no one-offs in the wage costs for the quarter.


Net profit is pegged at Rs 8,032.3 crore (up 54.6 per cent YoY and 5.3 per cent QoQ). We expect slippages at 2 per cent of loans and lower sequential provisions at Rs 2,429.1 crore.


BoB: We expect pre-provision operating profits to decline 12 per cent YoY to Rs 4,902.7 crore on weak revenue growth (lower treasury income) and elevated costs (clarification on the recent changes to retirement costs would have to be discussed).


We expect an unchanged loan book as demand for credit, especially corporate, is subdued. NII is pegged at Rs 8,048.6 crore; net profit at Rs 1,934.7 crore; and NIM at 3.1 per cent.


Motilal Oswal Financial Services


SBI: The brokerage expects credit costs to remain modest and asset quality to remain stable. GNPA and NNPA ratios are pegged at 4.7 per cent and 1.5 per cent, respectively, compared with 4.9 per cent and 1.5 per cent ratios in Q2FY22.


Loan growth could see strong sequential pickup at Rs 25.8 trillion and deposits may rise moderately to Rs 38.1 trillion. Net profit is seen at Rs 8,080 crore and NII is pegged at Rs 29,700 crore.


BoB: Elevated credit costs could keep earnings under pressure while opex trajectory, particularly employee costs, will be a key earnings driver.


On the asset quality front, slippage may moderate, asset quality could remain steady, and movement in watchlist / stressed pool will be key monitorables.


In absolute terms, NII is pegged at Rs 7,860 crore; operating profit at Rs 5,250 crore; and PAT at Rs 1,670 crore.


Loan book is seen at Rs 7.19 trillion and deposits at Rs 9,81 trillion. GNPA and NNPA ratios are estimated at 7.8 per cent and 2.8 per cent, respectively.



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