State Bank of India (NSE:SBIN) (BSE:500112)
State Bank of India (SBI) is an India-based commercial bank. The Company’s banking activities include Personal Banking, Agricultural/Rural, NRI Services, International Banking, Corporate Banking and Services. The Personal Banking offers deposit schemes, personal finance, gold banking and services, while Agricultural/Rural activities provide micro credit, financial inclusion schemes and supporting Regional Rural Banks. The NRI services offer remittances, investments, loans and deposits facilities to NRIs. The International Banking provides correspondent banking, wholesale banking, global trade services and remittances. The Corporate Banking offers project finance, working capital, leasing, loan syndication and other services. The other services that run through various offerings of the Company are internet banking, mobile banking, ATM services, demat services and other fee based services. Through its subsidiaries and associates, it also has presence in mutual fund and insurance sector.
Official website: www.sbi.co.in
State Bank of India (SBI) reported a good set of numbers for 4QFY2015 with PAT growth of 23.1% yoy to Rs3,742cr, mainly on account of 14% yoy growth in Net interest income and 29% yoy growth in other income. Loan book grows at slow pace; Margins improves qoq During 4QFY2015, the bank’s advances grew at a tepid pace of 7.5% yoy with domestic advances growing at 6.8% yoy. The SME and Agri segments grew by 1% and 0.9%, respectively, while Mid-corporate de-grew by 0.3%. On the other hand, retail and large corporate continued to witness steady growth of 15% and 12%, respectively. Deposits outpaced advances with a growth of 13.1% yoy for the quarter, with retail Term deposits growing at 22.9% yoy. The Global NIM increased by 4bp qoq to 3.16% in 4QFY2015 with yield on advances increasing marginally to 10.58% for the quarter. Cost of deposit increased to 6.34%, with term deposits growing faster than CASA deposits. The Non-interest income (excl. treasury) for the bank grew by 10.9% yoy, with fee income growing by 9.7% yoy while ‘others’ segment grew by 32.8% yoy due to high recoveries from written-off accounts and earning of dividend. On the asset quality front, slippages came down from Rs7,043cr (annualized ratio of 2.3%) in 3QFY2015 to Rs4,769cr (annualized ratio of 1.6%) in 4QFY2015. The Gross and Net NPA ratios went down by 65bp and 68bp yoy to 4.3% and 2.1%, respectively. Restructuring during the quarter was higher than expected at Rs11,885cr, on account of closure of restructuring window and not due to stress, according to the Management. The Reported Gross NPA + Restructured Std. to Gross advances stood at 8.43% for the quarter, as compared to 8.41% in 4QFY2014. Going ahead, the restructuring pipeline stands at Rs2,625cr. The PCR improved by 557bp qoq to 69.1% due to lower slippages. Outlook and valuation: SBI’s asset quality has been improving since the last few quarters. With expectation of improvement in economic growth in the medium term, asset quality woes would reduce, which is expected to improve return ratios. The bank’s core strength has been its high CASA and fee income, which has supported its core profitability in challenging times. Its strong capital adequacy also provides comfort. In our view, its current valuation of 1.1x FY2017E ABV, after adjusting for subsidiaries, factors in the positives for the bank. We recommend an Accumulate rating on the stock.