State Bank of India Q4 preview: Moderation in loan growth, stable NIM and asset quality?

Highlights:

• SBI posted a whopping 134% growth in Q3FY17.
• Gross non-performing assets (GNPA) also surged to Rs 1,08,172 crore by end of the Q3.
• Investors will watch on gross NPAs posted by SBI, after the divergence in the assets by major private banks.

State Bank of India will be announcing its fourth quarter ended March 31, 2017 result later on Friday.

Nilesh Parikh, Kunal Shah and Prakhar Agarwal analysts at Edelweiss Financial Services said, "Loan growth to be softer, but NII to be supported by lower funding cost. Incremental stress will likely be curtailed, keeping credit cost within initial guidance."

In its previous quarter of FY17 (Q3FY17), SBI posted a whopping 134% growth in its standalone net profit at Rs 2,610 crore compared to Rs 1,115 crore a year ago same period.

However, gross non-performing assets (GNPA) also surged to Rs 1,08,172 crore by end of the Q3 as against Rs 72,792 crore in Q3FY17. In percentage terms, GNPAs increased stood at 7.23% of gross advances versus 5.10%.

Motilal Oswal expects loan growth to moderate at 2.5% with incremental growth driven primarily by the retail segment. Deposit growth is seen to be strong at 13.5% year-on-year, led by impressive Current Account and Savings Account (CASA) mobilization in 3Q. 

Meanwhile, net interest margin will be largely stable on quarter-on-quarter (QoQ) basis. Motilal said, " Strong MCLR cuts and lowering of base rate are set to put downward pressure on yields, with CASA retention key to maintaining NIM."

In terms of net interest income, Motilal expects it to decline by 4% year-on-year owing to one-off repatriation gains in 4QFY16 and lower investment gains. Fee income growth would remain muted and cost pressure would remain high (+14% YoY). 

On asset quality, Motilal said, "Stress additions would remain largely in line with 3QFY17. RBI resolution with respect to large accounts is key to asset quality."

Overall bottom-line (profit after tax) of SBI is seen at Rs 2,230.4 crore, rising by 76.48% on year-on-year but declining by 14.54% quarter-on-quarter basis.

Also, investors will closing watch on the performance of gross NPAs posted by SBI, after the divergence in the assets found in major private banks like ICICI Bank, Yes Bank and Axis Bank.