STATE BANK OF IN­DIA

RAT­ING: BUY; TAR­GET PRICE: Rs 360; CMP: Rs 295; UP­SIDE: 22.1%

Financial Chronicle - - MONEY GAME -

SLIP­PAGES FOR THE QUAR­TER DE­CLINED

SBIN re­ported PAT of Rs 9.45b in 2QFY19 (vs loss of Rs 3.36b JMFe). Profit for the quar­ter was aided by one–off ex­cep­tional items per­tain­ing to a) stake sale in SBI Gen­eral (Rs 4.7b) and b) sale of bank’s mer­chant ac­quir­ing busi­ness to SBI Pay­ment Ser­vices (a wholly owned sub­sidiary, for Rs 10.9b). PBT (ex­clud­ing ex­cep­tional items) was at Rs 2.5b (vs loss of Rs 72b in 1Q). Slip­pages for the quar­ter de­clined 24 per cent QoQ to Rs 109b (2.3 per cent an­nu­alised), with spe­cific credit cost de­clin­ing c.70bps QoQ to 2.2 per cent. Cor­po­rate slip­pages are seem­ingly un­der con­trol for SBIN, con­tribut­ing c.30 per cent (Rs 32b) to slip­pages for the quar­ter, with the bal­ance from re­tail/SME and agri books. Net ex-NPL stress has now de­clined to 1.6 per cent of loans for SBIN.

■ Slip­pages and credit cost de­cline: Slip­pages for the quar­ter de­clined 24 per cent QoQ to Rs 109b (2.3 per cent an­nu­alised), with spe­cific credit cost de­clin­ing c.70bps QoQ to 2.2 per cent. Cor­po­rate slip­pages are seem­ingly un­der con­trol for SBIN, con­tribut­ing c.30 per cent (Rs 32b) to slip­pages for the quar­ter, with the bal­ance from re­tail/ SME and agri books. The watch­list de­clined 17.3 per cent se­quen­tially to Rs 204b (1 per cent of loans). Net ex-NPL stress has now de­clined to 1.6 per cent of loans for SBIN. Man­age­ment guided for a con­tin­ued mod­er­a­tion in spe­cific credit cost to below 2 per cent lev­els in H2FY19. SBIN made sep­a­rate dis­clo­sures on its power and NBFC port­fo­lios : a) On power – To­tal ex­po­sure is Rs 1.8trn (9 per cent of loans), with NPLs at 18 per cent (41 per cent PCR). Pri­vate power makes up 40 per cent of the to­tal stan­dard ex­po­sure with 19 per cent rated BB+ and below. b) Bank’s ex­po­sure to NBFCs / HFCs is at Rs 1.5trn (8 per cent of loans), with HFCs con­tribut­ing 33 per cent.

■ Steady op­er­at­ing quar­ter: SBI re­ported PAT of Rs 9.4b aided by ex­tra­or­di­nary in­come of Rs 15.6b de­rived from stake sales in sub­sidiaries. NII growth was healthy for SBI at 13 per cent YoY as NIMs held up at 2.73 per cent (-7bps QoQ), de­spite an un­favourable base in the pre­vi­ous quar­ter which saw large in­ter­est write-backs from NCLT re­cov­er­ies. Gross loan growth was healthy at 9.3 per cent YoY, with cor­po­rate and re­tail seg­ments both grow­ing at 14 per cent YoY, while growth in the SME seg­ment was at 5 per cent YoY. Core fee in­come (ex-re­cov­er­ies in writ­ten off ac­counts, trea­sury in­come) was an­other strong pos­i­tive in the quar­ter (+22 per cent QoQ), which led to a healthy PPoP growth of 3 per cent QoQ.

■ Val­u­a­tion and view: We value SBIN at 1.3x FY20E ad­justed BVPS, with sub­sidiaries con­tribut­ing Rs 82 to our TP.

Newspapers in English

Newspapers from India

© PressReader. All rights reserved.