Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
L o w e r T i e r I , h i g h e r N PA : I m p a c t r a t i n g c u t …
Moody’s Investors Service downgraded State Bank of India’s (SBI) bank
financial strength rating or standalone rating to ‘D+’ from ‘C-’. The
lower Baseline Credit Assessment (BCA) led to the Hybrid debt rating
downgrade to Ba3 (hyb) from Ba2 (hyb).The revised BFSR carries a
stable outlook and the Hybrid rating a negative outlook.
ƒ Uncertainty on capital infusion and higher NPA risk prompts move…
The bank’s Q1FY12 Tier I CRAR stands at 7.6% and total CRAR is at
11.6%, which is below RBI’s comfort level of 8% and 12%, respectively.
The current economic slowdown has led to an increase in delinquencies
pushing its GNPA ratio to 3.52%, which is a 33% YoY jump to | 277.7
billion in the last four quarters. In Q1FY12, on a QoQ basis, the rise in
GNPA was 10% on an absolute basis due to slowdown and rising interest
rates. We believe the expected increase in NPAs and no clarity from the
government on capital infusion have resulted in the downgrade from
Moody’s rating.
The fact that increasing NPAs (our estimate: 2.5% slippage ratio in FY12)
will demand higher capital to protect risk weighted assets and credit
growth of ~16-18% will also utilise capital, thereby prompting
government to infuse funds immediately.
ƒ How it impacts the bank?
We expect near term cost of funds to rise, particularly overseas
borrowing rates, for SBI. These external borrowings, as on FY11, are just
7% of total funding liabilities i.e. deposits plus borrowings. Hence, we
believe the event to be on account of facts already considered in
valuation of the bank. Moody’s assumptions may be based on higher NPA
accretion, which we believe to be a very pessimistic scenario. Near term
negative sentiments will see the stock’s underperformance continuing.
However, from a longer term perspective, these corrections can be
considered for accumulating the stock with a target of | 2200
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
L o w e r T i e r I , h i g h e r N PA : I m p a c t r a t i n g c u t …
Moody’s Investors Service downgraded State Bank of India’s (SBI) bank
financial strength rating or standalone rating to ‘D+’ from ‘C-’. The
lower Baseline Credit Assessment (BCA) led to the Hybrid debt rating
downgrade to Ba3 (hyb) from Ba2 (hyb).The revised BFSR carries a
stable outlook and the Hybrid rating a negative outlook.
ƒ Uncertainty on capital infusion and higher NPA risk prompts move…
The bank’s Q1FY12 Tier I CRAR stands at 7.6% and total CRAR is at
11.6%, which is below RBI’s comfort level of 8% and 12%, respectively.
The current economic slowdown has led to an increase in delinquencies
pushing its GNPA ratio to 3.52%, which is a 33% YoY jump to | 277.7
billion in the last four quarters. In Q1FY12, on a QoQ basis, the rise in
GNPA was 10% on an absolute basis due to slowdown and rising interest
rates. We believe the expected increase in NPAs and no clarity from the
government on capital infusion have resulted in the downgrade from
Moody’s rating.
The fact that increasing NPAs (our estimate: 2.5% slippage ratio in FY12)
will demand higher capital to protect risk weighted assets and credit
growth of ~16-18% will also utilise capital, thereby prompting
government to infuse funds immediately.
ƒ How it impacts the bank?
We expect near term cost of funds to rise, particularly overseas
borrowing rates, for SBI. These external borrowings, as on FY11, are just
7% of total funding liabilities i.e. deposits plus borrowings. Hence, we
believe the event to be on account of facts already considered in
valuation of the bank. Moody’s assumptions may be based on higher NPA
accretion, which we believe to be a very pessimistic scenario. Near term
negative sentiments will see the stock’s underperformance continuing.
However, from a longer term perspective, these corrections can be
considered for accumulating the stock with a target of | 2200
No comments:
Post a Comment