Visit http://indiaer.blogspot.com/ for complete details State Bank of India (SBI) is the largest commercial bank in India, with a balance sheet size of
over Rs7t. The bank, along with associate banks, has a network of over 14,000 branches
across India and controls over 18% of the banking business.
The government owns 57% of the bank, with FIIs owning 20% (maximum permissible is
20%).Over the last couple of years, SBI has been focusing on drawing significant synergies
through an internal consolidation of its associate banks.
Recent Developments:
SBI posted an unexpected 32% drop in reported quarterly profit in 4QFY10, hit by a jump
in bad loan provisions. Key highlights are:
Reported NII grew by 39% YoY and 6.4% QoQ. The NII stood at Rs. 67.2 bn against
expectation of Rs. 64.6 bn.
Other income declined 5% YoY but was up 34% QoQ.
Operating Expenses were way above expectations at Rs. 60.4 bn (Rs. 48.7 bn expected)
basically due to higher provisioning for employee cost.
Gross NPAs of the bank rose to 3.1% at end-March from 2.9% in the year ago period. The
provision coverage ratio stands at 59%. Provisions for bad loans jumped 69% to Rs.2187
crore (USD 485 million).
The bank expects credit growth of 21-22% in this fiscal year, up from 17% last year.
RBI has mandated a provision coverage ratio of 70% for all the banks by Sep 30, 2010 and
SBI is seeking an extension of the deadline by two quarters.
Valuation and view:
SBI would command valuation premium for its size and for being proxy to growth in
financial service space in Indian economy. We assume consolidated RoE of 16-18% over
FY09-12.
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