SBI Q2 Preview: PAT may slip up to 17% YoY, NII to likely drop by up to 2.7%. 8 things to watch out for

Core Viewpoint - The State Bank of India (SBI) is expected to report mixed financial results for Q2FY26, with healthy loan and deposit growth offset by continued pressure on margins and treasury income [17]. Profit After Tax (PAT) - Brokerages estimate PAT to be in the range of Rs 17,700–Rs 18,800 crore, indicating a year-over-year decline of 2% to 17% and a sequential fall of up to 20% [17]. - Specific estimates include: - Nomura: Rs 17,730 crore (-3% YoY, -7% QoQ) [2] - Emkay: Rs 18,771 crore (+2.4% YoY, -2% QoQ) [17] - JM Financial: Rs 17,702 crore (-3.4% YoY, -7.6% QoQ) [5] - Axis Direct: Rs 15,282 crore (-16.6% YoY, -20.2% QoQ) [5] Net Interest Income (NII) - NII is expected to remain largely flat year-over-year due to rising funding costs and subdued treasury gains [7]. - Estimates for NII include: - Nomura: Rs 41,440 crore, flat YoY and up 1% QoQ [17] - Emkay: Rs 41,172 crore, down 1.1% YoY and up 0.2% QoQ [12] - JM Financial: Rs 41,165 crore, down 1.1% YoY and up 0.2% QoQ [12] - Axis Direct: Rs 40,499 crore, down 2.7% YoY and down 1.4% QoQ [12] Net Interest Margins (NIMs) - NIMs are expected to contract further due to higher deposit costs and slower loan yield transmission [9]. - Estimates for NIMs include: - Nomura: 2.8%, down 32 bps YoY and 8 bps QoQ [9] - JM Financial: 2.6%, down 29 bps YoY and down 7 bps QoQ [9] Pre-Provision Operating Profit (PPOP) - Operating performance is anticipated to soften due to lower treasury gains and modest NII growth [10]. - Estimates for PPOP include: - Nomura: Rs 28,300 crore (-3% YoY, -7% QoQ) [10] - Emkay: Rs 28,028 crore (-4.3% YoY, -8.2% QoQ) [13] - JM Financial: Rs 28,102 crore (-4.1% YoY, -8% QoQ) [13] - Axis Direct: Rs 25,703 crore (-12.3% YoY, -15.8% QoQ) [13] Provisions - Axis Direct expects provisions to be slightly higher at Rs 5,138 crore (+14% YoY) [11]. - Most brokerages believe slippages and credit costs remain under control, indicating no major stress in the loan book [11]. Loans and Deposits - Loan growth is seen as a bright spot, driven by retail and corporate segments [14]. - Estimates for loans and deposits include: - Nomura: Loans at Rs 43.22 lakh crore (+12% YoY, +3% QoQ), deposits at Rs 55.83 lakh crore (+9% YoY, +2% QoQ) [14] - JM Financial: Loans at Rs 43.09 lakh crore (+11.7% YoY, +2.7% QoQ), deposits at Rs 56.10 lakh crore (+9.6% YoY, +2.5% QoQ) [14] Credit Cost - Credit cost is expected to remain benign, indicating continued asset quality stability [15]. - Estimates for credit cost include: - Nomura: 0.5% (down 5 bps YoY, 3 bps QoQ) [15] - JM Financial: 0.4% (down 6 bps YoY, 4 bps QoQ) [15] Key Monitorables - Brokerages will monitor the outlook on NIMs amid rising funding costs [16]. - The trajectory of loan growth across retail and corporate segments will also be a key focus [16]. - Investors should pay attention to management commentary on asset quality trends, slippages, recoveries, and guidance on credit costs and deposit mobilization strategy [16].