SBI Q2 preview: Yes Bank stake sale gains seen cushioning margin hit
State Bank of India (SBI) is expected to see a decline in net profit in the September quarter even as healthy loan growth and one-off treasury gain from stake sale in Yes Bank offset the pressure on margins, analysts say.
The country’s largest state-run lender is expected to post a standalone net profit ₹17,523 crore, down over 4% year-on-year in the quarter. Bloomberg Analyst survey The bank’s June quarter profit was as follows: ₹19,160 crore. Public sector lender saw operating profit rise 16% year-on-year ₹30,544 crore in the June quarter.
“We expect operating profit to grow 6% y-o-y as we build NIM compression for the quarter. We are seeing flat net interest income (NII) decline despite 12% y-o-y loan growth due to higher cost of funds and impact of recent interest rate cuts. Recent equity infusion to partially offset NIM pressure. Strong treasury earnings due to recent Yes Bank share sale,” Kotak Institutional Equities said in its pre-earnings note on October 6.
interest income
brokerage firms We expect the bank to report a 6-8 basis point (bp) decline in fixed NII and hence net net interest; This reflects rising deposit costs as competition for retail term deposits remains intense. The Reserve Bank of India has reduced the policy repo rate by 100 basis points so far in 2025. A basis point is one hundredth of a percentage point.
In the June quarter, the bank’s NII remained largely flat on a year-on-year basis. ₹41,072 crore but showed a decline of 4% sequentially. As a result, NIM also fell to 3.02% compared to 3.15% in the March quarter.
Emkay Global Financial Services also echoed a similar view, stating that Yes Bank expects better sequential performance led by gains from share sale, containment of loan loss provisions and lower operating expenses. It expects these factors to help the bank achieve a 1% return on assets, slightly below 1.14% in the June quarter.
On September 18, SBI announced that it has completed the transfer of approximately 13.18% stake in private sector lender Yes Bank to Japan’s Sumitomo Mitsui Banking Corp. (SMBC). ₹8,888.97 crore. SBI currently holds 10.8% stake in the private sector bank.
While the bank’s treasury book is likely to benefit from the share sale, which could provide a meaningful increase in non-interest income, analysts have warned that this is a one-off and will not offset the structural squeeze on margins in coming quarters.
asset quality
On the asset quality side, the bank’s performance is expected to remain stable due to limited stress from unsecured loans, while slippages in the agriculture segment, which were high in the previous quarter, are expected to ease.
“Provisions are expected to decrease by 7% on a quarterly basis. In terms of GNP (gross non-performing assets), asset quality is expected to improve by 6 basis points, while the cost of credit is expected to decrease by 4 basis points,” brokerage firm Prabhudas Lilladher said in a preliminary earnings note published on October 7.
Nomura Global Market Research expects SBI’s cost of credit to remain at 0.5% and GDP to improve marginally. Overall, he expects the bank’s loan and deposit growth to remain healthy.
Moreover, with the RBI announcing various measures to increase operational flexibility and ease of doing business for banks, analysts expect large lenders, including SBI, to benefit the most.
“Large private banks have a sizeable contingent buffer to manage the ECL (expected credit loss) transition; they can also benefit from flexibility in managing business format. Fund acquisition permission, differentiated deposit insurance premium and withdrawal of large borrower framework may also benefit large private banks and SBI,” ICICI Securities said in an October 6 report.
Management’s comments on the bank’s NIM outlook, deposit mobilization and loan growth guidance for the remainder of the financial year will remain on analysts’ radar.
