Credit growth sluggish; push on retail to continue: SBI is seeing very limited
pickup in industrial credit and hence acknowledged that they now expect
system credit growth of 14-15%. For SBI, deposit growth was stronger than
industry trend of 13-14% and hence SBI has moved on lowering deposit rates. As
growth remain elusive in other segments, SBI management said that they will
continue to concentrate on retail segments as perceived risk is lower but it is
still too early to ascertain impact from the cut in rates in mortgages/autos.
Maintains margin guidance of 3.75%; we see some risks: In spite of its
aggressive retail pricing, SBI maintained its margin guidance of 3.75% for FY13
and management believes that they are just passing on the benefit of SLR cut
and not offering low rates at the cost of margins. SBI has reduced deposit rate
by 50-100bps which is again positive for margins, but very low rates on retail,
cut in rates for SME customers and high NPA % will pressure margins in our view
Corporate asset quality – Weak Macro will continue to weight: After
disappointing the street in 1Q13 on delinquencies, SBI continues to refrain from
providing guidance on slippages as Macro situation continues to remain fluid.
Management re-iterated that they will have ~Rs30bn of recoveries over next 2
qtrs from slippages they had in 1Q13. We believe a significant pick up in asset
quality is unlikely in the near term given weak macros. Also, SBI seems to have
some exposure to companies where CBI respective coal block allocations.
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