State Bank of India Dawn still seems far away REDUCE ::Emkay

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State Bank of India

Dawn still seems far away

REDUCE

CMP: Rs1,863                                        Target Price: Rs1,750

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n     SBI’s Q2FY12 B/S quality deteriorates sharply with slippages of Rs80bn, GNPAs @ 4.2%, PCR slipping 400bps qoq and steep pressure on tier I CAR with net NPLs/net worth @23%

n     P&L provides some grim smile as NII/PAT at Rs104bn/28bn beat the consensus handsomely by 4%/12% respectively  driven by 20bps expansion in NIMs and under-provisions

n     No immediate catalyst in sight with no clarity on tone-down in slippages. Recoveries @ 40% of op. GNPAs not sufficient to stem the provision costs

n     Operational numbers likely to stay on track, but NPLs pressure to persist. Lowered our FY12E/FY13E ABV by 6%/8% resp.  Downgrade to REDUCE with target price of 1,750