Q2FY23 Preview: State Bank of India: NII seen at Rs321.0 billion, PAT at Rs104.6 billion

Result date: 5^th November, 2022
Recommendation: Buy
Target price: Rs700

State Bank of India (SBI) could post loan growth of 3.5% sequentially and 19% over the year-ago quarter for the September 2022 quarter. The bank’s Net Interest Income or NII could grow ~3% both sequentially as well as over the year-ago quarter. This, coupled with healthy momentum in non-interest income could drive a 24% sequential increase in total income (up 6% sequentially).

SBI’s Net Interest Margin could improve from ~3% levels in Q1FY23.

Growth in Pre-Provisioning Operating Profit (PPOP) though could be impacted by DHFL’s recovery in Q2FY22 and full impact of provisions for family pension of Rs74 billion taken in Q2FY22. Thus, this metric is incomparable on a year-on-year basis.

Slippages are likely to be lower sequentially at ~Rs89 billion, and analysts at IIFL Capital Services build-in credit cost of ~0.8% annualized.

SBI’s Profit After Tax (PAT) could grow 72% sequentially and 37% over the year-ago quarter.

Important management insights to watch out for:

• Credit demand across key segments
• Asset quality trends
• Margin drivers

Source: Company, IIFL Research