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State Bank of India (SBI.BO)
Neutral Equity Research
Below expectations, though not as bad as it seems; remain Neutral
MTM and NPL provisions pull down earnings
SBI reported profit decline of 46% yoy to Rs15.83bn, 52% below GSe and 24%
below Bloomberg consensus. However, adjusted for MTM hit on investment
book PBT was 18% below GSe, (-5% adjusted for treasury income and loan
loss provisions, which stood at 1.6% of net loans). Key highlights: (1) NII grew
33% yoy (20% qoq) to Rs96.9bn driven by (a) 18% yoy growth in advances, (b)
48 bp improvement in NIMs qoq on healthy CASA (47.9%, down qoq from
48.66%), aggressive repricing of loans and repayment of high cost deposits,
and (c) interest on tax refund of Rs1.3bn. Management remained confident of
maintaining NIM at 3.5%, but, we expect moderation as deposit costs continue
to play catch-up, while lending rates stop rising. (2) Non-interest income
declined 4% yoy as fee income grew only 9% and other income including
treasury and forex declined. (3) Expenses grew 23% yoy, though from a low
base last year, and will likely moderate to around 14% for FY2012, in our view.
(4) Asset quality deterioration was a key disappointment, with slippage ratio of
3.72% (up from 3.52% in 4Q) driven by SME, agriculture, and within industry –
infrastructure, iron and steel, textiles, and trading. We believe this has yet to
reflect the slowdown in economic activity and the full impact of higher rates.
Gross NPLs were 3.5% (up 9.6% qoq) and net NPLs were 1.61%.
Asset quality issues continue to hurt; likely to remain a problem
We lower our 12m CAMELOT-based target price to Rs2,500 from Rs2,760
on earnings revisions of -15.5%/-6.9% for FY12/ FY13 as we factor in higher
NPL provisions and MTM hit, while increasing NII growth. We remain
Neutral and believe stock price performance will likely remain muted until
NPL concerns recede. SBI trades at 9.4X FY12E P/E and 1.4X FY12E P/B
(standalone basis). Upside risk: Higher NIMs. Downside risk: higher NPLs.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
State Bank of India (SBI.BO)
Neutral Equity Research
Below expectations, though not as bad as it seems; remain Neutral
MTM and NPL provisions pull down earnings
SBI reported profit decline of 46% yoy to Rs15.83bn, 52% below GSe and 24%
below Bloomberg consensus. However, adjusted for MTM hit on investment
book PBT was 18% below GSe, (-5% adjusted for treasury income and loan
loss provisions, which stood at 1.6% of net loans). Key highlights: (1) NII grew
33% yoy (20% qoq) to Rs96.9bn driven by (a) 18% yoy growth in advances, (b)
48 bp improvement in NIMs qoq on healthy CASA (47.9%, down qoq from
48.66%), aggressive repricing of loans and repayment of high cost deposits,
and (c) interest on tax refund of Rs1.3bn. Management remained confident of
maintaining NIM at 3.5%, but, we expect moderation as deposit costs continue
to play catch-up, while lending rates stop rising. (2) Non-interest income
declined 4% yoy as fee income grew only 9% and other income including
treasury and forex declined. (3) Expenses grew 23% yoy, though from a low
base last year, and will likely moderate to around 14% for FY2012, in our view.
(4) Asset quality deterioration was a key disappointment, with slippage ratio of
3.72% (up from 3.52% in 4Q) driven by SME, agriculture, and within industry –
infrastructure, iron and steel, textiles, and trading. We believe this has yet to
reflect the slowdown in economic activity and the full impact of higher rates.
Gross NPLs were 3.5% (up 9.6% qoq) and net NPLs were 1.61%.
Asset quality issues continue to hurt; likely to remain a problem
We lower our 12m CAMELOT-based target price to Rs2,500 from Rs2,760
on earnings revisions of -15.5%/-6.9% for FY12/ FY13 as we factor in higher
NPL provisions and MTM hit, while increasing NII growth. We remain
Neutral and believe stock price performance will likely remain muted until
NPL concerns recede. SBI trades at 9.4X FY12E P/E and 1.4X FY12E P/B
(standalone basis). Upside risk: Higher NIMs. Downside risk: higher NPLs.
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