Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
State Bank Of India (SBI.BO) NEUTRAL A. Gupta
CP: Rs 1,942 TP: Rs 2,035 CAP: Rs 1.2t 91 22 6777 3895
Management finally focusing on improving coverage; Raising Estimates
4Q12 results beat estimates. SBI reported 4Q12 profit at Rs40.1 bn, 10% ahead of estimate on the back of stronger-thanexpected
core non-interest income (up 68% QoQ, 21% YoY). Domestic NIMs remained high (428 bp) and NPL slippages
moderated. However, SBI's FY12 ROA was at 0.9% despite historical high NIMs of 3.9%. We expect ROAs to remain
below 1% as margin expansion is offset by higher employee expense and NIM moderation. We are raising our FY12-FY14
EPS estimates by 5%-9% respectively.
Increase in coverage the key positive. NPL slippages moderated (~2.1% versus 4.1% in 3Q) as expected, partly driven by
the reclassification of some accounts to be restructured. Restructured assets slippage was higher than expected at Rs51 bn
and total problem loans have increased to ~8%. The key positive in the result was management starting to focus on
improving NPL coverage (raised to 68% from 63%) and has now made up the gap relative to peers with net NPLs dropping
to 19% of book value from 26% of book value (10-22% for other PSU banks).
However, stress from large corporates not visible yet. While, the overall NPL slippage during this quarter moderated, the
bank witnessed increased delinquencies in the mid-corporate segment, where NPL levels are now over 7%. As also
highlighted in earlier notes, the reported stress by the banks has been largely in the agri, SME and quasi government
entities (SEBs, Air India).
Valuation discount in line with peers. SBI is trading ~20% below its historical average trading multiple at 1.1x BV; however,
the discount is in line with other Indian banks. Also, with even reported ROE at the bank likely to remain at just about 15%
due to high opex and credit costs. We retain our NEUTRAL rating on the stock.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
State Bank Of India (SBI.BO) NEUTRAL A. Gupta
CP: Rs 1,942 TP: Rs 2,035 CAP: Rs 1.2t 91 22 6777 3895
Management finally focusing on improving coverage; Raising Estimates
4Q12 results beat estimates. SBI reported 4Q12 profit at Rs40.1 bn, 10% ahead of estimate on the back of stronger-thanexpected
core non-interest income (up 68% QoQ, 21% YoY). Domestic NIMs remained high (428 bp) and NPL slippages
moderated. However, SBI's FY12 ROA was at 0.9% despite historical high NIMs of 3.9%. We expect ROAs to remain
below 1% as margin expansion is offset by higher employee expense and NIM moderation. We are raising our FY12-FY14
EPS estimates by 5%-9% respectively.
Increase in coverage the key positive. NPL slippages moderated (~2.1% versus 4.1% in 3Q) as expected, partly driven by
the reclassification of some accounts to be restructured. Restructured assets slippage was higher than expected at Rs51 bn
and total problem loans have increased to ~8%. The key positive in the result was management starting to focus on
improving NPL coverage (raised to 68% from 63%) and has now made up the gap relative to peers with net NPLs dropping
to 19% of book value from 26% of book value (10-22% for other PSU banks).
However, stress from large corporates not visible yet. While, the overall NPL slippage during this quarter moderated, the
bank witnessed increased delinquencies in the mid-corporate segment, where NPL levels are now over 7%. As also
highlighted in earlier notes, the reported stress by the banks has been largely in the agri, SME and quasi government
entities (SEBs, Air India).
Valuation discount in line with peers. SBI is trading ~20% below its historical average trading multiple at 1.1x BV; however,
the discount is in line with other Indian banks. Also, with even reported ROE at the bank likely to remain at just about 15%
due to high opex and credit costs. We retain our NEUTRAL rating on the stock.
No comments:
Post a Comment