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Result Review
SBI
SBI posted nominal net profit of `21cr for 4QFY2011, compared to street as well as our
expectations of ~`3,000cr. Profitability was severely marred by the provisions on account
of NPAs, teaser loans, employee benefit-related liabilities and very high effective tax rate.
While advances growth was at reasonable 4.1% qoq and 19.8% yoy, deposits accretion
picked up substantial pace with growth of 6.3% qoq. CASA deposits registered growth of
22.1% yoy, led by saving account deposits growing by 26.2% yoy. Consequently, CASA
ratio improved further to 48.66% from 48.17% in 3QFY2011. On the margins front, the
bank disappointed with a 50bp qoq fall in calculated NIM during the quarter. The bank
made gratuity provisions of `1,565cr in FY2011 compared to just `46cr in FY2010.
Similarly pension provisions for FY2011 were higher at `2,473cr compared to `1,998cr in
FY2010. The bank adjusted `7,927cr in reserves for pension liability on account of wage
revision during FY2011. Due to the big hit on the reserves, the tier-I CAR of the bank fell
below the 8% mark (at 7.77%), thereby raising concerns of capital constraints going
forward, if the proposed rights issue does not go through soon enough.
The bank took a hit of `500cr towards standard assets provisions for teaser home loans.
NPA provisions of `8,792cr made during FY2011 also included `2,330cr for increasing
the provision coverage ratio. Consequently, credit costs also witnessed a sharp increase to
1.1% from 0.6% of average assets in 3QFY2011. On the asset-quality front, gross NPAs
and net NPAs of the bank on an absolute basis increased by 8.1% and 5.6%, respectively.
However, slippages for the quarter were much higher at 3.6%. As of quarter end, gross
NPA ratio stood at 3.3% (3.2% in 3QFY2011), while net NPA ratio stood at 1.6% (1.6% in
3QFY2011). Provision coverage ratio including technical write-offs stood at 65.0% (64.1%
in 3QFY2011). Effective tax rate for the quarter was almost 100% as the bank did not
recognise the deferred tax asset on employee benefit-related liabilities.
We maintain our Buy rating on the stock with a reduced target price of `2,870 (`3,199) to
factor in the reduction in net worth due to pension liabilities and relatively lower capital
adequacy position.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Result Review
SBI
SBI posted nominal net profit of `21cr for 4QFY2011, compared to street as well as our
expectations of ~`3,000cr. Profitability was severely marred by the provisions on account
of NPAs, teaser loans, employee benefit-related liabilities and very high effective tax rate.
While advances growth was at reasonable 4.1% qoq and 19.8% yoy, deposits accretion
picked up substantial pace with growth of 6.3% qoq. CASA deposits registered growth of
22.1% yoy, led by saving account deposits growing by 26.2% yoy. Consequently, CASA
ratio improved further to 48.66% from 48.17% in 3QFY2011. On the margins front, the
bank disappointed with a 50bp qoq fall in calculated NIM during the quarter. The bank
made gratuity provisions of `1,565cr in FY2011 compared to just `46cr in FY2010.
Similarly pension provisions for FY2011 were higher at `2,473cr compared to `1,998cr in
FY2010. The bank adjusted `7,927cr in reserves for pension liability on account of wage
revision during FY2011. Due to the big hit on the reserves, the tier-I CAR of the bank fell
below the 8% mark (at 7.77%), thereby raising concerns of capital constraints going
forward, if the proposed rights issue does not go through soon enough.
The bank took a hit of `500cr towards standard assets provisions for teaser home loans.
NPA provisions of `8,792cr made during FY2011 also included `2,330cr for increasing
the provision coverage ratio. Consequently, credit costs also witnessed a sharp increase to
1.1% from 0.6% of average assets in 3QFY2011. On the asset-quality front, gross NPAs
and net NPAs of the bank on an absolute basis increased by 8.1% and 5.6%, respectively.
However, slippages for the quarter were much higher at 3.6%. As of quarter end, gross
NPA ratio stood at 3.3% (3.2% in 3QFY2011), while net NPA ratio stood at 1.6% (1.6% in
3QFY2011). Provision coverage ratio including technical write-offs stood at 65.0% (64.1%
in 3QFY2011). Effective tax rate for the quarter was almost 100% as the bank did not
recognise the deferred tax asset on employee benefit-related liabilities.
We maintain our Buy rating on the stock with a reduced target price of `2,870 (`3,199) to
factor in the reduction in net worth due to pension liabilities and relatively lower capital
adequacy position.
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