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State Bank of India
Investment case: We continue with our Neutral stance on SBI and relatively prefer
PNB/BOB. Asset quality has remained volatile over the last 3-4 qtrs. Risks from high
Infrastructure exposure remains and we do not expect any significant turnaround in
asset quality. ROEs continue to remain ~15%, significantly below peers and thus we
believe premium valuations is not warranted.
Asset quality continues to disappoint: Slippages continue to remain high with gross
slippages at >2.0% in spite of a strong economic recovery. We expect credit costs to
remain elevated on higher slippages and coverage shortfall. High growth in the
Infrastructure book could lead to some restructuring over the medium term.
Margin pressures back ended: We expect margins to moderate from current levels
over the next 6-9 mnts but margin contraction would be relatively back ended. Large
disbursements in the teaser home loan would also impact margins in FY12 but
maturity of the high costs 1000day deposits raised in 2008 would help negate some
margin pressure.
Loan growth: We factor in ~18% loan growth for SBI in FY12-13E. Infrastructure
loan growth which has been a major driver for loan growth for most PSU banks
would moderate going forward. With increasing rates, retail loan demand could also
moderate.
Key risks: Like all PSU banks, SBI has increased Infrastructure exposure
significantly over the last 12-18mnts and given the lack of fuel, low merchant rates
and weak financial health of the state SEBs, asset quality over the medium term
could get impacted.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
State Bank of India
Investment case: We continue with our Neutral stance on SBI and relatively prefer
PNB/BOB. Asset quality has remained volatile over the last 3-4 qtrs. Risks from high
Infrastructure exposure remains and we do not expect any significant turnaround in
asset quality. ROEs continue to remain ~15%, significantly below peers and thus we
believe premium valuations is not warranted.
Asset quality continues to disappoint: Slippages continue to remain high with gross
slippages at >2.0% in spite of a strong economic recovery. We expect credit costs to
remain elevated on higher slippages and coverage shortfall. High growth in the
Infrastructure book could lead to some restructuring over the medium term.
Margin pressures back ended: We expect margins to moderate from current levels
over the next 6-9 mnts but margin contraction would be relatively back ended. Large
disbursements in the teaser home loan would also impact margins in FY12 but
maturity of the high costs 1000day deposits raised in 2008 would help negate some
margin pressure.
Loan growth: We factor in ~18% loan growth for SBI in FY12-13E. Infrastructure
loan growth which has been a major driver for loan growth for most PSU banks
would moderate going forward. With increasing rates, retail loan demand could also
moderate.
Key risks: Like all PSU banks, SBI has increased Infrastructure exposure
significantly over the last 12-18mnts and given the lack of fuel, low merchant rates
and weak financial health of the state SEBs, asset quality over the medium term
could get impacted.
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