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State Bank of India (SBI.BO; Rs2,293.25; 1L)
State Bank of India presented at our India conference today. Key takeaways:
Loan growth likely to remain healthy - Management has been seeing relatively
healthy growth levels over the last couple of months and expects FY12 loan
growth to remain quite strong at around 19-20% levels (in-line with industry
growth). Loan growth is expected to remain quite broad-based with growth
across all segments especially in the corporate and SME segments. While
management has started to see some growth moderation in mortgage loans,
incremental disbursements remain healthy and expects overall retail loans likely
to grow at a relatively more moderate pace of around 15-17% levels.
Net Interest Margins expected to improve - SBI's NIMs declined substantially
in 4Q11 (to 306bps), however, management says that adjusted for one-offs, NIMs
were more in the region of 325bps. Higher lending rate increases recently
(+100bps over the last 5 months) should lead to better NIMs in the near terms as
well as for FY12 (expect 350bps NIMs for FY12).
Delay in capital issuance not to impact loan growth - While there is a
possibility of a delay in the government approvals for capital raising, it will not
impact loan growth as they have sufficient room before hitting regulatory limits.
Also management looking to improve capital efficiency though various measures
such as better utilization of sanctioned credit limits, increasing proportion of rated
corporate assets, etc.
Increase in pension liability was a one-off and not likely to recur –
Management clarified further on the increase in pension liabilities and mentioned
that a hike in wage costs not directly linked to a hike in pension costs and has
only been prospective historically, the impact this time was larger as it was
implemented on a retrospective basis since Nov 2007. In future, they are likely to
provide for such hikes on an ongoing basis – at least partially.
Asset quality a key focus area - Remains a key focus area for the management
and suggests improvements in overall slippages and credit costs for FY12 over
the previous year. Management does not see any significant signs of slippages in
the retail segment, though there could be some slippages from the restructured
corporate loans in 1Q12.
Overall profitability to improve on cost/productivity gains - SBI's
costs/employee remain among the highest relative to peers and suggests that
they will have to focus on driving more productivity gains to improve return ratios
over the medium term; expects ROEs to move up to 18% over the medium term.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
State Bank of India (SBI.BO; Rs2,293.25; 1L)
State Bank of India presented at our India conference today. Key takeaways:
Loan growth likely to remain healthy - Management has been seeing relatively
healthy growth levels over the last couple of months and expects FY12 loan
growth to remain quite strong at around 19-20% levels (in-line with industry
growth). Loan growth is expected to remain quite broad-based with growth
across all segments especially in the corporate and SME segments. While
management has started to see some growth moderation in mortgage loans,
incremental disbursements remain healthy and expects overall retail loans likely
to grow at a relatively more moderate pace of around 15-17% levels.
Net Interest Margins expected to improve - SBI's NIMs declined substantially
in 4Q11 (to 306bps), however, management says that adjusted for one-offs, NIMs
were more in the region of 325bps. Higher lending rate increases recently
(+100bps over the last 5 months) should lead to better NIMs in the near terms as
well as for FY12 (expect 350bps NIMs for FY12).
Delay in capital issuance not to impact loan growth - While there is a
possibility of a delay in the government approvals for capital raising, it will not
impact loan growth as they have sufficient room before hitting regulatory limits.
Also management looking to improve capital efficiency though various measures
such as better utilization of sanctioned credit limits, increasing proportion of rated
corporate assets, etc.
Increase in pension liability was a one-off and not likely to recur –
Management clarified further on the increase in pension liabilities and mentioned
that a hike in wage costs not directly linked to a hike in pension costs and has
only been prospective historically, the impact this time was larger as it was
implemented on a retrospective basis since Nov 2007. In future, they are likely to
provide for such hikes on an ongoing basis – at least partially.
Asset quality a key focus area - Remains a key focus area for the management
and suggests improvements in overall slippages and credit costs for FY12 over
the previous year. Management does not see any significant signs of slippages in
the retail segment, though there could be some slippages from the restructured
corporate loans in 1Q12.
Overall profitability to improve on cost/productivity gains - SBI's
costs/employee remain among the highest relative to peers and suggests that
they will have to focus on driving more productivity gains to improve return ratios
over the medium term; expects ROEs to move up to 18% over the medium term.
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