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Below are Views On SBI Q3 FY21 First Cut: `Set to deliver positive surprise on asset quality` By Mr. Rajiv Mehta, Yes Securities

SBI Q3 FY21 First Cut: ‘Set to deliver positive surprise on asset quality

* Earnings were slightly lower than estimates due to lower non-interest income

* Loan growth was ahead of estimates at 3% qoq and 7% yoy -  driven by sustained strong traction in retail portfolio (up 15.5% yoy) - including investments in Corporate Bonds & CPs (credit substitutes), the loan growth stood is at 8% yoy 

* Domestic NIM for the quarter at 3.34%, has remained stable sequentially.

* Reported Gross/Net NPLs at 4.8%/1.2% v/s proforma Gross/Net NPLs at 5.4%/1.8% - Rs53bn provision carried on proforma slippages including for unrealized interest - besides this and the provisions for restructured accounts, bank holds Rs63bn of Covid provisions (25-30 bps of Adv.)

* Proforma Slippages for 9M FY21 at Rs165bn and Restructuring requests received till Dec 31 at Rs181bn – combined at 1.5% of loan book

* SMA-2 as of Dec 31, adjusted for overlap with proforma slippages and restructuring, stood at just 30 bps of advances - this implies that impaired loan formation in FY21 could undershoot management’s guidance (2.5% of advances) - Credit Cost in Q4 could be lower than Q3. 

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