Modest earnings and missed estimates: SBI numbers singe BSE Bankex

After plummeting 1,255 points on Thursday, the BSE Bankex lost further ground on Friday as it fell 498 points, wiping out a total market capitalisation to the tune of Rs 1.1 trillion.

The slide on Friday began after State Bank of India (SBI)’s net profit of Rs 9.113.53 crore for Q4FY22 missed Bloomberg estimates of Rs 10,180 crore. The net interest margin saw only a slight sequential increase. While the lender’s slippages rose to Rs 2,845 crore from Rs 2,334 crore in the December 2021 quarter, the gross non-performing asset (NPA) ratio narrowed 53 bps sequentially to 3.97% and the net NPA ratio declined 32 bps to 1.02%. However, it set aside Rs 3,260 crore as bad loan provisions, around 5% higher than the quantum in the December 2021 quarter. The stock ended the session lower by 3.8% at Rs 445.05.

The sentiment in banking stocks had already been hit on Thursday after Punjab National Bank (PNB) reported a poor set of earnings with a 65% y-o-y drop in net profits due to a 35% increase in credit costs. The slippages jumped sharply to around 6% annualised, meaningfully outpacing recoveries. The net interest income (NIM) was up by a muted 5% y-o-y. The stock crashed to Rs 28.60 at close on Thursday from the previous close of Rs 33.1.

While loan growth has been reasonably good at most state-owned lenders, some have reported bigger slippages and made higher loan loss provisions suggesting the balance sheets, although much stronger, are not fully cleaned up yet. There is some concern among analysts that rising interest rates – given a big chunk of loans is linked to the repo rate – could stymie demand for credit.

While Bank of Baroda (BoB) saw a turnaround with net profits for the March quarter coming in at Rs 1,779 crore against a loss of Rs 1,047 crore in Q4FY21, these were supported by tax benefits. The lender on Friday reported a good increase in the net interest income of 21% y-o-y though there was a sequential decline in the NIM of around seven bps. Other income was down 72% y-o-y. Ahead of the results, the stock closed lower by 1.1% at Rs 95.

Again, Union Bank of India on Friday reported an 8.3% y-o-y rise in net profits to Rs 1,440 crore on the back of a strong 25% growth in NII to Rs 6,769 crore.
The value of slippages in the March quarter was Rs 5,672 crore, higher than Rs 3,411 crore in the December 2021 quarter. Provisions fell 2% y-o-y to Rs 3,618 crore. However, margins were under pressure and fell 25 bps sequentially to 2.75% in Q4FY22. Asset quality improved as the gross NPAs as a share of total advances fell 51 bps on a sequential basis to 11.11% and the net NPA ratio declined 41 bps to 3.68%.

Last week, Canara Bank (CBK) reported a mixed operating performance with NII growing 25% y-o-y and fresh slippages at an elevated Rs 4,740 crore. The lender’s net interest margin expanded by 10 bps sequentially to 2.9%.

Healthy recoveries, upgrades and write-offs helped the bank announce better asset quality. The GNPA ratio improved by 29 bps q-o-q to 7.51%, while the net npa was better by 21 bps at 2.65%.