SBI share price gains 2% ahead of June quarter results; brokerages see improvement in asset quality

SBI share price gains 2% ahead of June quarter results; brokerages see improvement in asset quality

State Bank of India (SBI) share price rose 2% intraday on July 31 over July quarter earnings. The sale of a stake in the life insurance business led by Q1FY21 is likely to sharpen the bank’s profitability, while additional COVID-19 regulations could limit growth.

Net interest income will be 10 percent per annum for the quarter, debt growth of 7 percent, and net interest margin for the quarter.

The stock traded up by Rs 14.75 at Rs 1191.30 or 2.55 percent at 09:54. It touched an intraday high of Rs 191.55 and an intraday low of Rs 186.85.

It is one of the most active stocks on the NSE in terms of volumes, with 1,63,92,832 shares traded.

Brokerages expect property quality to improve on a sequential basis with slippages less than Q4FY20, although regulations due to COVID-19 may see an increase on a YOY basis but consecutive terms may be lower.

“We expect a higher focus on NII (13 percent YoY) given the recent cuts in lending yields and deposit rates. Credit growth slowed to 7 percent at YOY and 2.95 percent at QoQ where NIM (core) remained unchanged.

Treasury income would include gains on account of stake-sale in SBI Life Insurance. ” said Kotak Institutional Equities which sees 191 percent YoY growth in profit and 39 percent in pre-provision operating profit (PPoP).

Kotak 2 percent loans mostly agriculture (except seasonal maturity), SME loans. The suspension ratio is expected to further decline to lead to the retail / SME segment.

“We expect slippages mostly from SME loans, but the pace of accretion to be largely better than Q4,” said Sharekhan.

ICICI Securities also feels the moratorium of 23 percent is expected to decline in line with peers led by retail & SME segments. “We factor in higher slippages in Agri due to seasonality and loan loss provisions of Rs 9,670 crore. And overall provisions at Rs 10,360 crore versus Rs 13,495 crore. In Q4FY20 which had excess provisions booked. Hence, net profit is likely to grow 100 percent YoY and 31 percent QoQ.”

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