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India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Positive asset quality surprise
SBI’s bottomline performance was well ahead of our (and street) estimates
(PAT at Rs40.5bn vs Rs37.6bn) led by positive surprise on non-interest income
and opex. The highlight of the quarter was management delivering on its
promise of improving asset quality matrices: GNPA down 17bps QoQ to 4.4%,
slippages down to Rs44bn vs run-rate of Rs80bn in last two quarters and
strong upgrades & recoveries. While the improvement in asset quality
matrices is encouraging, the tough operating environment should still keep
the credit costs stiff. We upgrade the stock to Buy on attractive valuations.
Asset quality matrices improve: Asset quality matrices sprung a positive surprise
and showed signs of improvement during the quarter: 1) GNPA improved by ~17
bps QoQ to 4.44% 2) Slippage rate normalized to ~2% from +4% in last two
quarters 3) upgrades & recoveries showed strength 4) PCR improved materially to
68% and 5) credit costs sustained at a high 1.5%. Meanwhile, the cumulative
restructured portfolio increased by 14% QoQ (to 4.9%) while cumulative slippages
from the pool was stable at ~26%. With this, the management has delivered on its
guidance to improve asset quality matrices by focussing on resolving assets
(especially on the retail front) by deployment of personnel and intense monitoring.
NII inline: NII grew by a strong 45% YoY to Rs117bn (vs our estimate of Rs115bn).
Sequentially, NIM witnessed a contraction of ~15bps on lower investment yields
while advances growth stood at ~15% YoY. On margin front, we are building in
contraction of __bps during FY13 led by recent lending rate cuts and potential risk
to pricing power in a weak credit demand environment.
Loan growth @ 15%: Led by strong growth in agri (23% YoY) and international
book (benefit of rupee depreciation) overall loan book growth improved
marginally to 15% (vs 14.4% last quarter). The management aims at a higher credit
growth (16-18%) for FY13 as it believes that asset quality deterioration has peaked
and capital position has been strengthened. Current capital position remains
healthy with Tier I at 9.8% and CAR at 13.86%.
Non-interest income and opex surprises positively: Non-interest income
surprised positively with a sharp ~150% jump QoQ led by seasonal factors as well
as typical chunkiness experienced in Q4. The surprise can be traced to handsome
forex income (up 36% YoY) and substantial dividend income (Rs5.2bn) during the
quarter. Opex too surprised positively led by a 20% decline in other operating
expenses on a sequential basis.
Upgrade to Buy on valuations: We have tweaked our earnings estimates to factor
in additional information. While the improvement in asset quality matrices during
Q4FY12 is encouraging, the tough operating environment currently and
challenges to economic recovery should still keep the credit costs stiff. Post our
earnings revision and roll-over of valuation to FY14E, we raise our target price to
Rs2,450 (based on 1.3x FY14E Adj. BVPS for the standalone banking business along
with Rs386/share for value of associate banks and Rs257/share for non-banking
businesses). We had downgraded the stock to hold on limited upside; however
given the correction in recent months and upward revision in target price, we are
upgrading the stock to Buy. At current market price, the stock trades at 1.2x FY14
BVPS, 8x FY14E EPS and implies an upside of ~22% to our fair value estimate of
Rs2,450.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Positive asset quality surprise
SBI’s bottomline performance was well ahead of our (and street) estimates
(PAT at Rs40.5bn vs Rs37.6bn) led by positive surprise on non-interest income
and opex. The highlight of the quarter was management delivering on its
promise of improving asset quality matrices: GNPA down 17bps QoQ to 4.4%,
slippages down to Rs44bn vs run-rate of Rs80bn in last two quarters and
strong upgrades & recoveries. While the improvement in asset quality
matrices is encouraging, the tough operating environment should still keep
the credit costs stiff. We upgrade the stock to Buy on attractive valuations.
Asset quality matrices improve: Asset quality matrices sprung a positive surprise
and showed signs of improvement during the quarter: 1) GNPA improved by ~17
bps QoQ to 4.44% 2) Slippage rate normalized to ~2% from +4% in last two
quarters 3) upgrades & recoveries showed strength 4) PCR improved materially to
68% and 5) credit costs sustained at a high 1.5%. Meanwhile, the cumulative
restructured portfolio increased by 14% QoQ (to 4.9%) while cumulative slippages
from the pool was stable at ~26%. With this, the management has delivered on its
guidance to improve asset quality matrices by focussing on resolving assets
(especially on the retail front) by deployment of personnel and intense monitoring.
NII inline: NII grew by a strong 45% YoY to Rs117bn (vs our estimate of Rs115bn).
Sequentially, NIM witnessed a contraction of ~15bps on lower investment yields
while advances growth stood at ~15% YoY. On margin front, we are building in
contraction of __bps during FY13 led by recent lending rate cuts and potential risk
to pricing power in a weak credit demand environment.
Loan growth @ 15%: Led by strong growth in agri (23% YoY) and international
book (benefit of rupee depreciation) overall loan book growth improved
marginally to 15% (vs 14.4% last quarter). The management aims at a higher credit
growth (16-18%) for FY13 as it believes that asset quality deterioration has peaked
and capital position has been strengthened. Current capital position remains
healthy with Tier I at 9.8% and CAR at 13.86%.
Non-interest income and opex surprises positively: Non-interest income
surprised positively with a sharp ~150% jump QoQ led by seasonal factors as well
as typical chunkiness experienced in Q4. The surprise can be traced to handsome
forex income (up 36% YoY) and substantial dividend income (Rs5.2bn) during the
quarter. Opex too surprised positively led by a 20% decline in other operating
expenses on a sequential basis.
Upgrade to Buy on valuations: We have tweaked our earnings estimates to factor
in additional information. While the improvement in asset quality matrices during
Q4FY12 is encouraging, the tough operating environment currently and
challenges to economic recovery should still keep the credit costs stiff. Post our
earnings revision and roll-over of valuation to FY14E, we raise our target price to
Rs2,450 (based on 1.3x FY14E Adj. BVPS for the standalone banking business along
with Rs386/share for value of associate banks and Rs257/share for non-banking
businesses). We had downgraded the stock to hold on limited upside; however
given the correction in recent months and upward revision in target price, we are
upgrading the stock to Buy. At current market price, the stock trades at 1.2x FY14
BVPS, 8x FY14E EPS and implies an upside of ~22% to our fair value estimate of
Rs2,450.
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