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http://content.icicidirect.com/mailimages/ICICIdirect_StateBankofIndia_Q4FY12.pdf
RATING....................................................................................... Changed from Hold to Buy
S t r o n g g u i d a n c e , s u r g i n g P A T s p u r c o n v i c t i o n
State Bank of India (SBI) posted a stellar set of results with PAT surging
by 24.1% QoQ to | 4050.3 crore (I direct estimate- | 3295 crore). The core
performance continued to remain robust as expected while improvement
in asset quality surprised positively. NII grew 45.2% YoY to | 11703.8
crore on the back of strong NIM of 3.9%. However, fresh slippages was
the major highlight, which came way lower at | 4383 crore compared to
Street estimate of | 8000 crore. This kept absolute GNPA flat sequentially
at | 39676 crore. The GNPA ratio improved by 17 bps QoQ to 4.4% while
the NNPA ratio declined substantially by 40 bps QoQ to | 1.8%. Credit
and deposit growth was modest at 14.7% YoY and 14.6% YoY to | 8675.8
billion and | 10436.5 billion. Overseas credit, agriculture and auto loans
witnessed strong credit growth in the range of 20-24%.
Outlook – Improved NNPA ratio of 40 bps QoQ without hitting profitability
is highly commendable. Management expects fresh slippages at mere
~| 2500 crore for Q1FY13E that raises earning visibility. NIM is estimated
to be capped & remained in the range of 3.5-3.75% due to pressure on
CASA, rising CoF & cut in lending rates. As per Basel III norms,
management indicated it may not be required to raise capital till FY15E.
Valuation – The stock was beaten down significantly pre-results as it may
not have priced in the sharp improvement in asset quality witnessed in
Q4FY12 results. If SBI manages to perform consistently, then the potential
upside in the stock could be much higher. Low provisioning would boost
profitability and also shore up the Tier 1 capital. We are valuing the core
bank at 1.2x FY14E ABV with value of | 1800/share and adding
| 400/share from associate banks and group companies, thereby
maintaining a target price of | 2200 and BUY rating.
Key highlights of quarter
ƒ Fresh slippages have moderated after quite a few quarters. If SBI
manages to contain these at current levels then provisioning would
be at lower levels. Upgradations and recoveries were strong in retail
segment. Of the fresh restructuring of | 5134 crore, Air India & KS
Oil accounted for | 1215 crore and 770 crore, respectively
ƒ CEB fees accounted for 80% of non-interest income. SBI managed
to receive higher dividend from subsidiaries of | 515 crore
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
http://content.icicidirect.com/mailimages/ICICIdirect_StateBankofIndia_Q4FY12.pdf
RATING....................................................................................... Changed from Hold to Buy
S t r o n g g u i d a n c e , s u r g i n g P A T s p u r c o n v i c t i o n
State Bank of India (SBI) posted a stellar set of results with PAT surging
by 24.1% QoQ to | 4050.3 crore (I direct estimate- | 3295 crore). The core
performance continued to remain robust as expected while improvement
in asset quality surprised positively. NII grew 45.2% YoY to | 11703.8
crore on the back of strong NIM of 3.9%. However, fresh slippages was
the major highlight, which came way lower at | 4383 crore compared to
Street estimate of | 8000 crore. This kept absolute GNPA flat sequentially
at | 39676 crore. The GNPA ratio improved by 17 bps QoQ to 4.4% while
the NNPA ratio declined substantially by 40 bps QoQ to | 1.8%. Credit
and deposit growth was modest at 14.7% YoY and 14.6% YoY to | 8675.8
billion and | 10436.5 billion. Overseas credit, agriculture and auto loans
witnessed strong credit growth in the range of 20-24%.
Outlook – Improved NNPA ratio of 40 bps QoQ without hitting profitability
is highly commendable. Management expects fresh slippages at mere
~| 2500 crore for Q1FY13E that raises earning visibility. NIM is estimated
to be capped & remained in the range of 3.5-3.75% due to pressure on
CASA, rising CoF & cut in lending rates. As per Basel III norms,
management indicated it may not be required to raise capital till FY15E.
Valuation – The stock was beaten down significantly pre-results as it may
not have priced in the sharp improvement in asset quality witnessed in
Q4FY12 results. If SBI manages to perform consistently, then the potential
upside in the stock could be much higher. Low provisioning would boost
profitability and also shore up the Tier 1 capital. We are valuing the core
bank at 1.2x FY14E ABV with value of | 1800/share and adding
| 400/share from associate banks and group companies, thereby
maintaining a target price of | 2200 and BUY rating.
Key highlights of quarter
ƒ Fresh slippages have moderated after quite a few quarters. If SBI
manages to contain these at current levels then provisioning would
be at lower levels. Upgradations and recoveries were strong in retail
segment. Of the fresh restructuring of | 5134 crore, Air India & KS
Oil accounted for | 1215 crore and 770 crore, respectively
ƒ CEB fees accounted for 80% of non-interest income. SBI managed
to receive higher dividend from subsidiaries of | 515 crore
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