SBI Q2 preview: Yes Bank stake sale gains seen cushioning margin hit

Core Viewpoint - State Bank of India (SBI) is anticipated to experience a decline in net profit for the September quarter, despite healthy loan growth and one-off treasury gains from its stake sale in Yes Bank, which may offset margin pressures [1][2]. Financial Performance - SBI is expected to report a standalone net profit of ₹17,523 crore for the quarter, reflecting a decrease of over 4% year-on-year, compared to ₹19,160 crore in the June quarter [2]. - The bank's operating profit is projected to grow by 6% year-on-year, reaching ₹30,544 crore in the June quarter, despite a flat net interest income (NII) due to higher funding costs and recent rate cuts [2][4]. - Interest income is expected to remain flat, leading to a 6-8 basis point decline in net interest margin (NIM), attributed to rising deposit costs amid intense competition for retail term deposits [3][4]. Treasury Gains - SBI completed the divestment of approximately 13.18% of its stake in Yes Bank to Sumitomo Mitsui Banking Corp. for ₹8,888.97 crore, reducing its stake to 10.8% [5]. - The stake sale is expected to provide a significant boost to non-interest income, although analysts caution that this is a one-off event and will not mitigate the ongoing structural compression in margins [6]. Asset Quality - The bank's asset quality is expected to remain stable, with limited stress from unsecured loans and a reduction in slippages from the agricultural segment [7]. - Provisions are anticipated to decline by 7% quarter-on-quarter, with gross non-performing assets (GNPA) improving by 6 basis points and credit costs decreasing by 4 basis points [7][8]. Market Outlook - Analysts expect SBI's credit cost to remain contained at 0.5%, with marginal improvement in GNPA, and healthy loan and deposit growth [8]. - Recent measures by the Reserve Bank of India to enhance operational flexibility are expected to benefit large lenders, including SBI [8][9]. - Management's commentary on NIM outlook, deposit mobilization, and credit growth guidance will be closely monitored by analysts [10].