State Bank of India Q2 preview: Street expects NII growth to be weak, but NIM to improve QoQ

State Bank of India will be reporting its Q2 earnings on Wednesday and the Street is expecting net interest income (NII) growth to be weak, and net interest margin (NIM) to improve on a sequential basis.

A CNBC-TV18 poll suggests an NII growth of 2 percent year-on-year (YoY) and 4 percent quarter-on-quarter (QoQ), profit growth of 69 percent YoY and about 19  percent QoQ.

Loan growth is expected to be around 5 to 6 percent YoY and flat sequentially. Restructuring may increase, given the fact that small-ticket size loans could cause restructuring this quarter.

Asset quality is expected to improve on account of healthy recovery and upgrades, the likes of DHFL money coming in.

Phillip Capital estimates gross NPAs at 5.2 percent versus 5.3 percent in the previous quarter.

One of the things to watch out for will be slippage. Banks such as Canara Bank, and Bank of India have recognised exposure to groups like Srei Infra; this could result in a hit this quarter.