SBI -Healthy performance overall… :: ICICI Securities, link

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Healthy performance overall…
• PAT came in at | 3100 crore, surging 30.7% YoY (I-direct estimate:
| 2968 crore), mainly led by slightly higher-than-expected NII growth
at 8.4% YoY to | 13275 crore & strong traction in other income at
39.4% YoY to | 4571 crore. Fee income grew at healthy pace of 19%
YoY. Large trading gains of | 450 crore (up 92% YoY) were seen
• Asset quality was better-than-expected. Against expectation of ~|
5000 crore of net additions to GNPA, the actual amount was merely |
300 crore. Fresh slippages fell to | 7700 crore from | 9900 crore QoQ
while recoveries & upgradations were | 7400 crore. Absolute GNPA
stood at | 60712 crore with the GNPA ratio flat QoQ at 4.9%
• Credit growth moderated further to 9.7% YoY vs. estimate of 12%
YoY to | 12096 billion mainly due to slower traction in the domestic
book. Deposits grew in line at 14% YoY to | 14737 billion. Domestic
NIM stayed at healthy levels of 3.49% (down 5 bps)
Largest bank in India by a distance, strong deposit franchise
SBI being the largest bank in India both by asset size (| 18 lakh crore) and
profitability (~| 11000 crore) played the lead role in the banking space in
setting interest rates, products, etc. SBI has managed ~16-17% market
share in both deposits and advances consistently. Its credit has grown at
a healthy 17.4% CAGR from | 542503 crore in FY09 to | 1209829 crore in
FY14 while its deposit has grown at 13.4% CAGR from | 742070 crore in
FY09 to | 1394409 crore in FY14. SBI has managed a CASA ratio of 44%,
one of the best in the industry. Retail deposit funds ~82% of total deposit,
which is stable in nature while its bulk deposit proportion is sub 10%.
Hence, liquidity risk, interest rate risks are limited. Going ahead, we
expect SBI to maintain its market share & grow in line with industry, with
deposit CAGR of 15.5% & credit CAGR of 15% from | 1209829 crore in
FY14 to | 1604457 crore in FY16E.
NIM of 3.1% commendable, cost to income ratio consistently high
Owing to strong liability franchise, its cost of fund (sub 6%) is among the
lowest in industry, which enables the bank to earn such strong NIM of
3.1% (domestic NIM - 3.5%) on such a large base. Strong NII provides us
comfort about ability of the bank to make adequate provisions. We expect
SBI to continue to maintain its NIM at ~3.1%, going ahead. The CIR has
always been high at ~50%.The bank employs >200,000 people & has
seen a consistent revision in wage agreements from unions & other
associations, pushing overall staff cost to upwards of ~30% of income.
Credit quality and surging NPAs to be watched
SBI has a well-diversified credit book with agri exposure of | 120253 crore
(9.8%), large corporate- | 242719 crore (19.8%), medium corporate-
| 228384 crore (18.7%), SME- | 179773 crore (14.7%) & international
credit - | 214302 crore (17.5%) as on FY14. GNPAs rose sharply 2.4x to
| 60434 crore (4.9% of credit) while its standard RA are manageable at
3.5% (| 43962 crore). We expect GNPA of | 69820 crore in FY15E.
Remains most preferred stock in PSU banking space; maintain BUY
Among PSU banks, we like to stay with the largest bank as it is a proxy to
the economy over the long term. Post capital infusion in Q3FY14, its tier 1
ratio is adequate at 9.6% as on FY14. The management has guided that
considering modest credit growth scenario (~15%), it will not need to
raise capital till next year. We maintain our BUY rating and the target price
of | 3234, valuing the core book at 1.9x FY16E ABV and adding | 450 for
associate banks & subsidiaries (life and general insurance, AMC, etc).

LINK
http://content.icicidirect.com/mailimages/IDirect_SBI_Q2FY15.pdf