SBI 4Q FY 2013

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  • 7/30/2019 SBI 4Q FY 2013

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    Please refer to important disclosures at the end of this report 1

    Particulars (` cr) 4QFY13 3QFY13 % chg (qoq) 4QFY12 % chg (yoy)NII 11,078 11,154 (0.7) 11,704 (5.3)Pre-prov. profit* 7,761 7,791 (0.4) 9,597 (19.1)

    PAT 3,299 3,396 (2.9) 4,050 (18.5)Source: Company, Angel Research;

    SBI reported a moderate operating performance for 4QFY2013, as its NII andoperating profit declined by 5.3% and 19.1% yoy, respectively, which was in-linewith our estimates. The bank provided around`950cr for wage revisions duringthe quarter, and hence, operating expenses expectedly increased by 20.3% yoy.The bank witnessed a sequential decline in its gross NPA levels, on the back ofsequentially lower slippages and higher recoveries/upgrades. The bank chose to

    improve its PCR (up by 509bp qoq) and hence, provisioning expenses came inmuch higher by 33.1% yoy and earnings declined by 18.5% yoy.

    Business growth healthy; Asset quality improves: During 4QFY2013, the banksadvances grew by 20.5% yoy, while deposits registered a growth of 15.2% yoy.Advances growth was on account of strong 40.4% yoy growth in large corporatebook (12.1% qoq) and a healthy 18.8% increase in SME advances. Growth insaving deposits was moderate at 15.3% yoy, while current deposits increasedmoderately by 12.5% yoy. Domestic NIM were lower by 15bp sequentially, onaccount of 21bp sequential fall in its yield on advances, which was primarily onaccount of aggressive pricing for better quality lending (almost 90% of theincremental lending in mid and large corporate, was above investment grade)and interest reversals on slippages. Non-interest income (excluding treasury)remained flat on a yoy basis, even that was largely aided by a strong growth of41.8% yoy in forex income and 31.2% yoy in others segment, as fee incomedeclined by 8.1% yoy. Treasury income came in at`229cr as against a treasuryloss of`26cr in 4QFY12. On the asset-quality front, the annualized slippage ratecame in at 2.7%, lower sequentially from 3.8% in 3QFY2013. Almost 70% of theincremental slippages came from the mid-corporate and SME segments.Recoveries/upgrades came in much healthy at`5,718cr compared to`2,797cr in3QFY2013. Hence, on a sequential basis, gross NPA levels came lower by 4.2%.PCR improved by 509bp sequentially to 66.6% and absolute net NPA levelsdeclined by 13.5% sequentially. Additionally, the bank restructured advancesworth ~`8,670cr during the quarter (Suzlon and Sasan Power being the majorones), thereby taking its outstanding restructured book to`43,111cr.

    Outlook and valuation: The banks asset quality has witnessed elevated pressurefor quite some time now, but the pressures appear to be moderating. Even goingforward net slippages are expected to stabilize in-line with peers, as the economic

    cycle gradually improves. However, at the current market price, the stock istrading at 1.2x FY2015E ABV (adjusting for value of subsidiaries 1.0x FY2015EABV) vis--vis its historic range of 1.32.3x and median of 1.6x. Also, consideringthe banks dominant position and reach, healthy fee income and superiorearnings quality, we recommend a Buy rating on the stock with a target price of`2,637.Key financials (standalone)Y/E March (` cr) FY2012 FY2013 FY2014E FY2015ENII 43,291 44,331 49,630 56,293% chg 33.1 2.4 12.0 13.4

    Net profit 11,707 14,105 16,580 19,478% chg 41.7 20.5 17.5 17.5

    NIM (%) 3.6 3.2 3.1 3.0

    EPS (`) 174.5 206.2 242.4 284.8P/E (x) 12.3 10.4 8.9 7.6

    P/ABV (x) 1.8 1.6 1.4 1.2

    RoA (%) 0.9 0.9 1.0 1.0

    RoE (%) 16.5 16.1 16.3 16.8

    Source: Company, Angel Research

    BUYCMP `2,151

    Target Price `2,637

    Investment Period 12 Months

    Stock Info

    Sector

    Bloomberg Code

    Shareholding Pattern (%)

    Promoters 62.3

    MF / Banks / Indian Fls 16.0

    FII / NRIs / OCBs 13.3

    Indian Public / Others 8.4

    Abs. (%) 3m 1yr 3yr

    Sensex 2.0 21.5 19.6

    SBIN (2.1) 9.2 (4.1)

    Banking

    Market Cap (`cr) 147,146

    Beta 1.2

    52 Week High / Low 2550/1816

    Avg. Daily Volume 371,057

    Face Value (`) 10

    BSE Sensex 19,704

    Nifty 5,984

    Reuters Code SBI.BO

    SBIN@IN

    Vaibhav Agrawal022 3935 7800 Ext: 6808

    [email protected]

    Sourabh Taparia022 3935 7800 Ext: 6872

    [email protected]

    Akshay Narang022 3935 7800 Ext: 6829

    [email protected]

    Harshal Patkar022 3935 7800 Ext: 6847

    [email protected]

    State Bank of IndiaPerformance Highlights

    4QFY2013 Result Update | Banking

    May 24, 2013

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    State Bank of India | 4QFY2013 Result Update

    May 24, 2013 2

    Exhibit 1:4QFY2013 performance (standalone)

    Particulars (` cr) 4QFY13 3QFY13 % chg (qoq) 4QFY12 % chg (yoy) FY2013 FY2012 % chgInterest earned 30,784 30,344 1.5 28,696 7.3 119,651 106,521 12.3- on Advances / Bills 23,064 22,800 1.2 22,141 4.2 90,537 81,078 11.7- on investments 7,035 7,072 (0.5) 6,205 13.4 27,195 23,885 13.9

    - on balance with RBI & others 166 110 51.4 102 63.5 545 414 31.5

    - on others 519 362 43.4 248 109.3 1,374 1,144 20.1

    Interest Expended 19,706 19,189 2.7 16,992 16.0 75,326 63,230 19.1Net Interest Income 11,078 11,154 (0.7) 11,704 (5.3) 44,326 43,291 2.4Other income 5,547 3,648 52.0 5,264 5.4 16,041 15,221 5.4Other income excl. treasury 5,318 3,230 64.6 5,290 0.5 14,943 15,271 (2.1)

    - Fee Income 3,873 2,559 51.3 4,216 (8.1) 11,484 12,091 (5.0)

    - Treasury Income* 229 418 (45.2) (26) (980.8) 1,098 (49) (2,321.8)

    - Forex Income 475 440 8.0 335 41.8 1,692 1,432 18.1

    - Others 970 231 318.9 739 31.2 1,767 1,748 1.1

    Operating income 16,625 14,803 12.3 16,968 (2.0) 60,366 58,512 3.2Operating expenses 8,864 7,012 26.4 7,371 20.3 29,284 26,069 12.3- Employee expenses 5,612 4,351 29.0 5,431 3.3 18,381 17,457 5.3

    - Other Opex 3,252 2,661 22.2 1,940 67.6 10,904 8,612 26.6

    Pre-provision Profit 7,761 7,791 (0.4) 9,597 (19.1) 31,082 32,443 (4.2)Provisions & Contingencies 4,181 2,668 56.7 3,140 33.1 11,131 13,960 (20.3)- Provisions for NPAs 3,974 2,766 43.7 2,837 40.1 11,368 11,546 (1.5)

    - Provisions for Investments (52) (129) (59.7) 27 (292.6) (962) 1,533 (162.7)

    - Provisions for Std. Assets 267 63 322.3 375 (28.8) 750 979 (23.4)

    - Other Provisions (8) (32) (75.3) (98) (91.9) (25) (98) (74.9)

    PBT 3,580 5,123 (30.1) 6,456 (44.6) 19,951 18,483 7.9Provision for Tax 280 1,727 (83.8) 2,406 (88.3) 5,846 6,776 (13.7)PAT 3,299 3,396 (2.9) 4,050 (18.5) 14,105 11,707 (13.7)Effective Tax Rate (%) 7.8 33.7 (2587)bp 37.3 (2943)bp 29.3 36.7 (736)bp

    Source: Company, Angel Research;

    Exhibit 2:4QFY2013 Actual vs. Angel estimates

    Particulars (` cr) Actual Estimates Var (%)Net interest income 11,078 11,401 (2.8)Non-interest income 5,547 5,110 8.6

    Operating income 16,625 16,510 0.7Operating expenses 8,864 8,908 (0.5)

    Pre-prov. profit 7,761 7,603 2.1Provisions & cont. 4,181 2,807 49.0

    PBT 3,580 4,796 (25.4)

    Prov. for taxes 280 1,436 (80.5)

    PAT 3,299 3,359 (1.8)Source: Company, Angel Research

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    State Bank of India | 4QFY2013 Result Update

    May 24, 2013 3

    Exhibit 3:4QFY2013 performance analysis (standalone)Particulars 4QFY13 3QFY13 % chg (qoq) 4QFY12 % chg (yoy)Balance sheet

    Advances (`cr) 1,045,617 978,115 6.9 867,579 20.5

    Deposits (`cr) 1,202,740 1,156,691 4.0 1,043,647 15.2

    Credit-to-Deposit Ratio (%) 86.9 84.6 237bp 83.1 381bp

    Current deposits (`cr) 110,581 80,094 38.1 98,273 12.5

    Saving deposits (`cr) 414,907 410,906 1.0 359,847 15.3

    CASA deposits (`cr) 525,488 491,000 7.0 458,120 14.7

    CASA ratio (%) 43.7 45.5 (181)bp 46.6 (291)bp

    CAR (%) 12.9 12.2 71bp 13.9 (94)bp

    Tier 1 CAR (%) 9.5 8.7 83bp 9.8 (30)bp

    Profitability Ratios (%)Cost of deposits 6.3 6.3 (2)bp 6.0 34bp

    Yield on advances 10.5 10.8 (21)bp 11.1 (51)bp

    Cost of funds 6.5 6.5 (2)bp 6.2 31bpReported NIM (global) 3.2 3.3 (17)bp 4.1 (90)bp

    Cost-to-income ratio 53.3 47.4 595bp 43.4 988bp

    Asset qualityGross NPAs (`cr) 51,189 53,458 (4.2) 39,676 29.0

    Gross NPAs (%) 4.8 5.3 (55)bp 4.4 31bp

    Net NPAs (`cr) 21,956 25,370 (13.5) 15,819 38.8

    Net NPAs (%) 2.1 2.6 (49)bp 1.8 28bp

    Provision Coverage Ratio (%) 66.6 61.5 509bp 68.1 (152)bp

    Slippage ratio (%) 2.7 3.8 (106)bp 2.3 39bp

    Loan loss prov. to avg assets (%) 1.0 0.8 29bp 0.9 19bp

    Source: Company, Angel Research

    Business growth healthy

    During 4QFY2013, the banks advances grew by a healthy 20.5% yoy (6.9% qoq).

    Advances growth was on account of strong increase of 40.4% yoy in large

    corporate book (12.1% qoq) and a healthy 18.8% increase in SME loan book. The

    medium corporate, agri and retail lending increased by 17.1%, 16.4% and 14.9%

    yoy respectively.

    Retail advances growth was backed by a strong 35.5% yoy increase in auto loans

    and a 16.3% yoy increase in home loans. The advances in foreign operations also

    increased at a healthy 24.6% yoy. The banks loan book continues to remain welldiversified, with no segment accounting for more than 20.0% of the total loan

    book.

    Deposits registered a healthy growth of 15.2% yoy. CASA deposits increased by

    14.7% yoy backed by a healthy 15.3% growth in saving deposits and a moderate

    12.5% increase in current deposits. However, the CASA ratio declined by ~180bp,

    yet, it remains at a healthy 43.7% in 4QFY13 (45.5% in 3QFY13 and 46.6% in

    4QFY12). The share of bulk deposits in total deposits has also reduced from

    ~5.5% in 4QFY12 to ~1.0% in 4QFY13.

    The CD ratio has also increased by 381bp yoy and stands at 86.9% in 4QFY13(84.6% in 3QFY13 and 83.1% in 4QFY12).

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    State Bank of India | 4QFY2013 Result Update

    May 24, 2013 4

    Exhibit 4:Healthy credit and deposit growth

    Source: Company, Angel Research

    Exhibit 5:Healthy CASA franchise

    Source: Company, Angel Research

    Exhibit 6:Segment-wise advances growth

    Segment (%)Large corporate 40.4

    Mid-corporate 17.1

    SME 18.8

    Agri 16.4

    International 24.6

    Home 14.3

    Auto 31.3

    Education 9.7

    Overall advances (gross) 20.7Source: Company, Angel Research

    Exhibit 7:Loan book remains well-diversified

    Source: Company, Angel Research

    Domestic NIMs dip by 15bp sequentially

    The domestic NIM were lower by 15bp sequentially at 3.48% while the overseas

    NIMs increased marginally by 2bp sequentially to 1.4%. Hence, the overall NIM of

    the bank declined by 14bp sequentially to 3.1%.

    The domestic NIM was lower majorly on account of 21bp sequential fall in its yield

    on advances, which was primarily on account of aggressive pricing for better

    quality lending (almost 90% of the incremental lending in mid and large

    corporate, was above investment grade) and interest reversals on slippages.

    The domestic cost of deposits for the bank was marginally lower by 2 bp

    sequentially at 6.3%. The overseas NIMs remained increased marginally by 2 bp

    sequentially to 1.4%, as a 13bp fall in overseas yield on assets was fully offset by a

    2bp decline in overseas cost of funds.

    Going forward, the Management expects to maintain its domestic NIMs at 3.6%

    levels, as they anticipate margin expansion on improved CD ratio to offset the

    expected margin pressure on account of aggressive loan pricing and an improving

    asset quality going forward.

    14

    .7

    18

    .9

    17

    .2

    15

    .6

    20

    .5

    11

    .7

    16

    .1

    16

    .5

    15

    .6

    15

    .2

    83.1 83.1

    81.8

    84.6

    86.9

    76.0

    80.0

    84.0

    88.0

    -

    5.0

    10.0

    15.0

    20.0

    25.0

    4QFY12 1QFY13 2QFY13 3QFY13 4QFY13

    Adv. YoY growth Dep. YoY growth CD ratio (RHS)

    46

    .6

    46

    .1

    45

    .0

    45

    .5

    43

    .7

    6.4

    10.1 9.5 9.8

    14.7

    -

    7.0

    14.0

    21.0

    30.0

    34.0

    38.0

    42.0

    46.0

    50.0

    4QFY12 1QFY13 2QFY13 3QFY13 4QFY13

    Reported domestic CASA ratio (%) CASA yoy growth (%, RHS)

    International15%

    Mid-

    Corporate19%

    Large

    Corporate

    16%

    SME

    16%

    Agricultural

    12%

    Retail

    19%

    Others

    2%

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    State Bank of India | 4QFY2013 Result Update

    May 24, 2013 5

    Exhibit 8:Domestic YoA declined by 21bp qoq

    Source: Company, Angel Research

    Exhibit 9:Overall NIM came off by 14bp sequentially

    Source: Company, Angel Research

    Non-interest income (excl. treasury) remained flat, aided bystrong growth in forex income, even as fee income declines

    The non-interest income (excluding treasury) for the bank remained flat on a yoy

    basis at`5,813cr, largely aided by a strong growth of 41.8% yoy in forex income

    and 31.2% in others, even as fee income declined by 8.1% yoy to `3,873cr.

    Within fee income the commission on BG increased by 8.95, whereas, other

    streams such as loan processing charges, commission on business from Govt., LC

    commission, transaction fees and misc income stream were all on a decline. As

    per the Management, the bank has reduced/waived off its fee charges on loan

    processing, bank transactions and guarantees and has completely waived off

    charges on transactions within the bank (as per industry standard) and minimumbalances on savings account, which has lead to decline in fee income. The aim

    behind this is to attract more low cost deposits and make up for this lost income by

    reducing the cost of funds.

    Treasury income for the bank came at `229cr during the quarter compared to a

    net treasury loss of`26cr in 4QFY2012. Hence, the overall non-interest income for

    the bank grew by a moderate 5.4% yoy.

    Exhibit 10:Lower fee income results in muted yoy growth in non interest income

    Particulars (` cr) 4QFY13 3QFY13 % chg (qoq) 4QFY12 % chg (yoy)CEB 3,873 2,559 51.3 4,216 (8.1)

    Treasury 229 418 (45.2) (26) -

    Forex 475 440 8.0 335 41.8

    Dividend 637 - - 515 23.7

    Others 333 232 43.5 224 48.6

    Other income 5,547 3,649 52.0 5,264 5.4Other income excl. treasury 5,318 3,231 64.6 5,290 0.5

    Source: Company, Angel Research

    11.0510.86 10.87 10.75

    10.54

    8.0

    8.5

    9.0

    9.5

    10.0

    10.511.0

    11.5

    4QFY12 1QFY13 2QFY13 3QFY13 4QFY13

    (%)

    3.89

    3.573.34 3.31

    3.17

    1.5

    2.0

    2.5

    3.0

    3.5

    4.0

    4.5

    4QFY12 1QFY13 2QFY13 3QFY13 4QFY13

    (%)

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    State Bank of India | 4QFY2013 Result Update

    May 24, 2013 6

    Asset quality improves

    On the asset-quality front, the annualized slippage rate for the bank remained

    came in at 2.7%, lower sequentially from 3.8% in 3QFY2013. During 4QFY2013,

    fresh slippages came in at `5,868cr of which almost 70% came from the

    mid-corporate and SME segments. Of late, a large chunk of incremental slippages

    for the bank have come from the mid-corporate and SME segments and as a result

    gross NPA ratio for the bank in these segments has soared to 8.7% and 7.2%,

    respectively (though lower qoq). Industry wise, slippages came in majorly from

    infrastructure (`629cr), iron & steel (`598cr), textiles (`358cr), trade & services

    (`311cr) and IT (`304cr). As per the Management, ~80% of the exposure in

    infrastructure and iron & steel is to top rated companies and they have a very low

    (`4,600cr) exposure to state distribution companies (majorly Tamil Nadu & UP

    distribution companies ~`3,700cr which is restructured, no exposure to Punjab,

    Andhra Pradesh & Rajasthan).

    During the quarter, recoveries/upgrades came in much higher at `5,718cr

    compared to `2,797cr in 3QFY2013 and `3088cr in 2QFY2013. Hence, on a

    sequential basis, gross NPA levels were lower by 4.2%. PCR improved by 509bp

    sequentially to 66.6% and absolute net NPA levels declined by 13.5% sequentially.

    As of 4QFY2013, the gross NPA ratio stands at 4.8% (5.3% in 3QFY2013),

    while the net NPA ratio stands at 2.1% (2.6% in 3QFY2013) down by 55bp

    and 49bp sequentially, respectively.

    Additionally, the bank restructured advances worth ~`8,670cr during the quarter

    (Suzlon and Sasan Power, were the major ones), thereby taking its outstanding

    restructured book to `43,111cr.As per the management, further restructuringpipeline (incl. bilateral) stands at ~`5,000cr, of which medium corporate would

    comprise ~`2,800cr and large corporate would comprise ~`3,000cr, however,

    not necessarily in 1QFY2014 itself.

    Exhibit 11:Slippages remain at elevated levels

    Source: Company, Angel Research

    Exhibit 12:NPA ratios improve sequentially

    Source: Company, Angel Research

    2.3 5.0 3.3 3.8 2.7

    0.90.8

    0.5

    0.8

    1.0

    -

    0.3

    0.6

    0.9

    1.2

    -

    1.0

    2.0

    3.0

    4.0

    5.0

    6.0

    4QFY12 1QFY13 2QFY13 3QFY13 4QFY13

    Slippages (%) Credit cost (%, RHS)

    4.4

    5.0

    5.2

    5.3

    4.8

    1.8

    2.2

    2.4

    2.6

    2.1

    68.1

    64.3

    62.861.5

    66.6

    56.0

    60.0

    64.0

    68.0

    72.0

    -

    1.0

    2.0

    3.0

    4.0

    5.0

    6.0

    4QFY12 1QFY13 2QFY13 3QFY13 4QFY13

    Gross NPAs (%) Net NPAs (%) NPA coverage (%, RHS)

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    State Bank of India | 4QFY2013 Result Update

    May 24, 2013 7

    Exhibit 13:Break-up of provisioning expenses

    Particulars (` cr) 4QFY13 3QFY13 % chg (qoq) 4QFY12 % chg (yoy)NPA 3,974 2,766 43.7 2,837 40.1

    Standard assets 267 63 322.3 375 (28.8)Investments (52) (129) (59.7) 27 (292.6)

    Others (9) (32) (72.3) (98) (90.9)

    Total Provisions 4,180 2,668 56.7 3,140 33.1Source: Company, Angel Research;

    Cost-to-income ratio remains on the higher side, on back of

    subdued growth of 2.0% yoy in operating income as against

    20.3% yoy increase in operating expenses

    During the quarter, total employee expenses increased by 3.3% yoy to `5,612cr,

    while other operating expenses were higher by 67.6% to `3,252cr. Withinemployee expenses, payment to employees increased by 27.4% yoy to `4,707cr,

    while contribution for employees declined by 14.1% yoy. The increase in expenses

    owes to increased provisioning for the wages in anticipation of a new wage

    agreement. The bank has further expanded its already strong branch network to

    14,816 branches.

    Exhibit 14:Opex growth trends

    Particulars (` cr) 4QFY13 3QFY13 % chg (qoq) 4QFY12 % chg (yoy)Payment to employ. 4,707 3,608 30.5 3,696 27.4

    Contrib. for employ. 905 743 21.8 1,053 (14.1)

    Total staff expenses (A) 5,612 4,351 29.0 4,749 18.2Rent, taxes and lighting 683 613 11.4 575 18.8

    Dep. on property 346 313 10.5 300 15.3

    Others 2,223 1,735 28.1 1,747 27.2

    Other opex(B) 3,252 2,661 22.2 2,622 24.0Total opex (A)+(B) 8,864 7,012 26.4 7,371 20.3

    Source: Company, Angel Research

    Exhibit 15:Cost-to-income ratio remains elevated

    Source: Company, Angel Research

    Performance overview of subsidiaries

    SBI Life reported a PAT of `622cr for FY2013 as compared to `556cr in

    FY2012, increase of 19.1% yoy.

    SBI Capital Markets registered a PAT growth of 17.9% yoy to `296cr during

    FY2013. SBI DFHI recorded a PAT of`80cr in FY2013 as compared to a PAT

    of`44cr in FY2012.

    SBI Cards and Payment Services posted a PAT of `136cr for FY2013 as

    against `38cr posted in FY2012, increase of 257.8% yoy.

    SBI funds management recorded a PAT figure of`86cr for FY2013 as against

    `61cr for FY2012, increase of 40.9% yoy.

    SBIs associate banks recorded a muted net profit growth of 1.4% yoy to

    `3,678cr in FY2013.

    43.4 44.1 48.6 47.4 53.3

    2.2

    1.9 1.9 1.9

    2.3

    -

    0.5

    1.0

    1.5

    2.0

    2.5

    -

    10.0

    20.0

    30.0

    40.0

    50.0

    60.0

    4QFY12 1QFY13 2QFY13 3QFY13 4QFY13

    Cost-to-income ratio (%) Opex to average assets (%, RHS)

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    State Bank of India | 4QFY2013 Result Update

    May 24, 2013 8

    Investment arguments

    Strong CASA franchise

    SBI has a strong CASA franchise on account of its huge nationwide branch network(~15,000 as of 4QFY2013). As of 4QFY2013, the banks CASA ratio stood at

    46.5%, the highest amongst all other PSU banks.

    Strongest fee income among PSU banks

    SBI has a relatively strong share of fee income, owing to its strong corporate and

    government business relationships. In FY2013, the bank continued its dominance

    with non-interest income/assets at 1.0% (one of the highest among PSU banks).

    Net slippages likely to further stabilize

    In 4QFY2013, the annualized slippage rate for the bank moderated sequentially

    at 2.7% as against 3.8% in 3QFY2013. In 2HFY2013, the annualized slippages

    ratio for the bank at 3.2%, came lower than 4.1% in 1HFY2013 and 3.3% in

    2HFY2012. Going forward, net slippages are expected to stabilize in-line with

    peers, as the economic cycle gradually improves.

    Outlook and valuation

    The banks asset quality has witnessed elevated pressure for quite some time now,

    but the pressures appear to be moderating. Even going forward net slippages are

    expected to stabilize in-line with peers, as the economic cycle gradually improves.

    However, at the current market price, the stock is trading at 1.2x FY2015E ABV

    (adjusting for value of subsidiaries 1.0x FY2015E ABV) vis--vis its historic range of

    1.32.3x and median of 1.6x. Also, considering the banks dominant position and

    reach, healthy fee income and superior earnings quality, we recommend a Buyrating on the stock with a target price of `2,637.

    Exhibit 16:SOTP valuation summary

    Particulars Target multiple Value/share (`)SBI 1.25x FY15E ABV 2,184

    Associate Banks 0.8x-1.0x FY15E ABV 290

    Life Insurance 20.0x FY15ENBP 124

    Others (AMC, Cap Mkt, Factors, Cards) 39

    SOTP value 2,637Source: Angel Research

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    State Bank of India | 4QFY2013 Result Update

    May 24, 2013 9

    Exhibit 17:Key assumptions

    Particulars (%) Earlier estimates Revised estimatesFY2014E FY2015E FY2014E FY2015ECredit growth 17.0 17.0 17.0 17.0Deposit growth 17.0 17.0 17.0 17.0

    CASA ratio 42.6 42.0 42.3 41.6

    NIMs 3.2 3.1 3.1 3.0

    Other income growth 11.6 16.9 9.8 15.5

    Growth in staff expenses 12.5 12.5 12.5 12.5

    Growth in other expenses 10.0 10.0 10.0 10.0

    Slippages 2.6 2.5 2.8 2.3

    Source: Angel Research

    Exhibit 18:Change in estimates

    Particulars (` cr)FY2014E FY2015E

    Earlierestimates Revisedestimates Var. (%) Earlierestimates Revisedestimates Var. (%)Net interest income 49,683 49,630 (0.1) 56,444 56,293 (0.3)Non-interest income 17,408 17,613 1.2 20,302 20,319 0.1

    Operating income 67,091 67,243 0.2 76,746 76,612 (0.2)Operating expenses 32,738 32,672 (0.2) 36,549 36,457 (0.3)

    Pre-prov profit 34,354 34,570 0.6 40,197 40,155 (0.1)Provisions & cont. 9,683 9,728 0.5 11,496 10,950 (4.7)

    PBT 24,671 24,842 0.7 28,702 29,205 1.8

    Prov. for taxes 8,171 8,262 1.1 9,520 9,727 2.2

    PAT 16,500 16,580 0.5 19,182 19,478 1.5Source: Angel Research

    Exhibit 19:P/ABV band

    Source: Company, Angel Research

    0

    1,000

    2,000

    3,000

    4,000

    5,000

    6,000

    Apr-

    06

    Sep-0

    6

    Fe

    b-0

    7

    Jul-07

    Dec-0

    7

    May-0

    8

    Oc

    t-08

    Mar-

    09

    Aug-0

    9

    Jan-1

    0

    Jun-1

    0

    Nov-1

    0

    Apr-

    11

    Sep-1

    1

    Fe

    b-1

    2

    Jul-12

    Dec-1

    2

    May-1

    3

    Oc

    t-13

    Mar-

    14

    Price (`) 1.0x 1.5x 2.0x 2.5x 3.0x

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    State Bank of India | 4QFY2013 Result Update

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    Exhibit 20:P/E band

    Source: Company, Angel Research

    Exhibit 21:Premium/Discount to Sensex

    Source: Company, Angel Research

    Exhibit 22:Angel EPS forecast vs. consensus

    Year Angel forecast Bloomberg consensus Var (%)FY2014E 242.4 231.1 4.9

    FY2015E 284.8 272.2 4.6

    Source: Bloomberg, Angel Research

    0

    1,000

    2,000

    3,000

    4,000

    5,000

    Jan-0

    5

    May-0

    5

    Sep-0

    5

    Jan-0

    6

    May-0

    6

    Sep-0

    6

    Jan-0

    7

    May-0

    7

    Sep-0

    7

    Jan-0

    8

    May-0

    8

    Sep-0

    8

    Jan-0

    9

    May-0

    9

    Sep-0

    9

    Jan-1

    0

    May-1

    0

    Sep-1

    0

    Jan-1

    1

    May-1

    1

    Sep-1

    1

    Jan-1

    2

    May-1

    2

    Sep-1

    2

    Jan-1

    3

    May-1

    3

    Price (`) 9x 12x 15x 18x

    (70)

    (60)

    (50)(40)

    (30)

    (20)

    (10)

    0

    10

    20

    Apr-

    06

    Sep-0

    6

    Fe

    b-0

    7

    Jul-07

    Dec-0

    7

    May-0

    8

    Oc

    t-08

    Mar-

    09

    Aug-0

    9

    Jan-1

    0

    Jun-1

    0

    Nov-1

    0

    Apr-

    11

    Sep-1

    1

    Fe

    b-1

    2

    Jul-12

    Dec-1

    2

    May-1

    3

    Discount to Sensex Avg. His torical Discount

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    State Bank of India | 4QFY2013 Result Update

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    Exhibit 23:Recommendation summary

    Company Reco. CMP(`) Tgt. price(`) Upside(%) FY2015EP/ABV (x) FY2015ETgt. P/ABV (x) FY2015EP/E (x) FY2013-15EEPS CAGR (%) FY2015ERoA (%) FY2015ERoE (%)AxisBk Buy 1,458 1,853 27.1 1.6 2.0 9.6 17.3 1.6 17.6

    FedBk Neutral 452 - - 1.0 - 7.3 12.4 1.2 14.2

    HDFCBk Neutral 702 - - 3.3 - 16.4 22.8 1.8 21.8

    ICICIBk* Buy 1,204 1,503 24.8 1.7 2.2 12.5 15.5 1.5 15.6

    SIB Neutral 25 - - 0.9 - 5.6 9.5 1.0 17.0

    YesBk Neutral 506 - - 2.1 - 10.6 14.9 1.3 22.1

    AllBk Buy 123 144 16.9 0.6 0.7 4.0 14.2 0.6 12.7

    AndhBk Neutral 87 - - 0.5 - 3.8 (0.3) 0.7 13.0

    BOB Buy 692 851 22.9 0.7 0.9 4.9 15.9 0.9 15.7

    BOI Buy 300 350 16.9 0.7 0.8 4.4 21.6 0.7 15.0

    BOM Accumulate 57 64 12.5 0.6 0.7 4.2 13.4 0.7 16.0

    CanBk Accumulate 427 481 12.8 0.7 0.8 5.0 15.1 0.8 14.2CentBk Neutral 67 - - 0.6 - 3.7 48.4 0.6 13.8

    CorpBk Buy 407 495 21.6 0.5 0.7 3.8 7.1 0.7 14.5

    DenaBk Accumulate 88 97 11.1 0.5 0.6 3.4 5.0 0.7 15.1

    IDBI# Accumulate 85 93 9.6 0.5 0.5 3.8 26.5 0.8 13.4

    IndBk Buy 154 185 20.3 0.5 0.7 3.6 8.8 1.0 15.1

    IOB Accumulate 61 66 8.4 0.4 0.4 2.9 83.4 0.7 13.4

    J&KBk Accumulate 1,249 1,315 5.3 0.9 1.0 6.2 (3.8) 1.1 16.1

    OBC Accumulate 259 285 10.0 0.5 0.6 4.1 18.4 0.8 13.3

    PNB Buy 788 993 26.1 0.7 0.9 4.5 14.8 1.1 16.5

    SBI* Buy 2,151 2,637 22.6 1.2 1.4 7.6 17.5 1.0 16.8SynBk Accumulate 130 142 9.3 0.6 0.7 4.3 (4.4) 0.7 15.9

    UcoBk Neutral 77 - - 0.8 - 5.2 56.8 0.6 13.0

    UnionBk Accumulate 227 260 14.4 0.7 0.8 4.7 15.7 0.7 15.4

    UtdBk Buy 56 65 17.7 0.4 0.5 2.7 56.5 0.6 14.8

    VijBk Neutral 52 - - 0.5 - 4.6 9.6 0.4 12.0

    Source: Company, Angel Research; Note:*Target multiples=SOTP Target Price/ABV (including subsidiaries), #Without adjusting for SASF

    Company background

    State Bank of India is the largest bank in India, with an asset size of more than

    `15lakh cr. The bank has the widest network of 14,800+ branches, with dominantpresence across all regions of the country, with two-thirds of its branches in rural

    and semi-urban areas (in comparison, the second largest PSU bank has a total of

    ~5,900 branches and the largest private sector bank has a total of ~3,100

    branches). The bank also has ~186 overseas branches, which account for ~15%

    of its total loans. It has subsidiaries in life insurance, asset management, credit

    cards and capital markets, among others; and five regional subsidiary banks

    (having ~5,500 branches and combined asset size of ~`4.8lakh cr).

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    State Bank of India | 4QFY2013 Result Update

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    Income statement (standalone)Y/E March (` cr) FY10 FY11 FY12 FY13 FY14E FY15ENet Interest Income 23,671 32,526 43,291 44,331 49,630 56,293- YoY Growth (%) 13.4 37.4 33.1 2.4 12.0 13.4Other Income 14,968 15,825 14,351 16,035 17,613 20,319- YoY Growth (%) 17.9 5.7 (9.3) 11.7 9.8 15.4

    Operating Income 38,640 48,351 57,643 60,366 67,243 76,612- YoY Growth (%) 15.1 25.1 19.2 4.7 11.4 13.9

    Operating Expenses 20,319 23,015 26,069 29,284 32,672 36,457- YoY Growth (%) 29.8 13.3 13.3 12.3 11.6 11.6

    Pre - Provision Profit 18,321 25,336 31,574 31,082 34,570 40,155- YoY Growth (%) 2.3 38.3 24.6 (1.6) 11.2 16.2

    Prov. & Cont. 4,396 10,385 13,090 11,131 9,728 10,950- YoY Growth (%) 17.7 136.2 26.1 (15.0) (12.6) 12.6

    Profit Before Tax 13,925 14,951 18,483 19,951 24,842 29,205- YoY Growth (%) (1.8) 7.4 23.6 7.9 24.5 17.6

    Prov. for Taxation 4,759 6,686 6,776 5,846 8,262 9,727- as a % of PBT 34.2 44.7 36.7 29.3 33.3 33.3

    PAT 9,166 8,265 11,707 14,105 16,580 19,478- YoY Growth (%) 0.5 (9.8) 41.7 20.5 17.5 17.5

    Balance sheet (standalone)Y/E March (` cr) FY10 FY11 FY12 FY13 FY14E FY15EShare Capital 635 635 671 684 684 684Reserves &

    Surplus65,314 64,351 83,280 98,906 111,865 127,030

    Deposits 804,116 933,933 1,043,647 1,202,740 1,407,205 1,646,430

    - Growth (%) 8.4 16.1 11.7 15.2 17.0 17.0

    Borrowings 71,031 79,945 86,989 130,167 151,034 175,582

    Tier 2 Capital 31,980 39,624 40,016 39,016 38,040 37,089

    Other Liab &Prov.

    80,337 105,248 80,915 94,749 107,705 124,083

    Total Liabilities 1,053,414 1,223,736 1,335,519 1,566,261 1,816,535 2,110,898Cash balances 61,291 94,396 54,076 65,830 63,324 74,089

    Bank balances 24,898 28,479 43,087 48,990 45,219 52,568

    Investments 295,785 295,601 312,198 350,927 421,167 479,404

    Advances 631,914 756,719 867,579 1,045,617 1,223,371 1,431,344

    - Growth (%) 16.5 19.8 14.7 20.5 17.0 17.0

    Fixed Assets 4,413 4,764 5,467 7,005 7,884 8,891

    Other Assets 35,113 43,778 53,113 47,892 55,570 64,601

    Total Assets 1,053,414 1,223,736 1,335,519 1,566,261 1,816,535 2,110,898- Growth (%) 9.2 16.2 9.1 17.3 16.0 16.3

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    State Bank of India | 4QFY2013 Result Update

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    Ratio analysis (standalone)Y/E March FY10 FY11 FY12 FY13 FY14E FY15EProfitability Ratios (%)NIMs 2.5 3.0 3.6 3.2 3.1 3.0Cost to Income Ratio 52.6 47.6 45.2 48.5 48.6 47.6

    RoA 0.9 0.7 0.9 0.9 1.0 1.0

    RoE 15.7 13.3 16.5 16.1 16.3 16.8

    B/S ratios (%)CASA Ratio 47.3 49.4 44.8 43.7 42.3 41.6

    Credit/Deposit Ratio 78.6 81.0 83.1 86.9 86.9 86.9

    CAR 13.4 12.0 13.9 13.3 12.8 12.2

    - Tier I 9.5 7.8 9.8 9.9 9.9 9.6

    Asset Quality (%)Gross NPAs 3.0 3.3 4.5 4.8 5.0 4.9

    Net NPAs 1.7 1.6 1.8 2.1 2.0 1.7

    Slippages 2.2 2.8 3.2 3.6 2.8 2.3

    Loan Loss Prov./Avg. Assets 0.5 0.7 0.9 0.8 0.5 0.5

    Provision Coverage 59.2 65.0 68.1 66.6 68.0 71.5

    Per Share Data (`)EPS 144.4 130.1 174.5 206.2 242.4 284.8

    ABVPS 972.5 967.7 1,200.1 1,375.1 1,566.6 1,822.7

    DPS 30.0 30.0 35.0 41.5 47.0 56.0

    Valuation RatiosPER (x) 14.9 16.5 12.3 10.4 8.9 7.6

    P/ABVPS (x) 2.2 2.2 1.8 1.6 1.4 1.2

    Dividend Yield 1.4 1.4 1.6 1.9 2.2 2.6

    DuPont Analysis (%)NII 2.4 2.9 3.4 3.1 2.9 2.9

    (-) Prov. Exp. 0.4 0.9 1.0 0.8 0.6 0.6

    Adj. NII 1.9 2.0 2.4 2.3 2.4 2.3

    Treasury 0.2 0.1 (0.1) 0.1 0.0 0.0

    Int. Sens. Inc. 2.1 2.0 2.3 2.4 2.4 2.4

    Other Inc. 1.3 1.3 1.2 1.0 1.0 1.0

    Op. Inc. 3.4 3.3 3.5 3.4 3.4 3.3

    Opex 2.0 2.0 2.0 2.0 1.9 1.9PBT 1.4 1.3 1.4 1.3 1.4 1.5

    Taxes 0.5 0.6 0.5 0.4 0.5 0.5

    RoA 0.9 0.7 0.9 0.9 1.0 1.0Leverage (x) 17.7 19.1 18.8 17.1 17.1 17.4

    RoE 15.7 13.3 16.5 16.1 16.3 16.8

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    State Bank of India | 4QFY2013 Result Update

    Research Team Tel: 022 - 39357800 E-mail: [email protected] Website: www.angelbroking.com

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    Disclosure of Interest Statement State Bank of India

    1. Analyst ownership of the stock No

    2. Angel and its Group companies ownership of the stock No

    3. Angel and its Group companies' Directors ownership of the stock No

    4. Broking relationship with company covered No

    Ratings (Returns): Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%)Reduce (-5% to -15%) Sell (< -15%)

    Note: We have not considered any Exposure below `1 lakh for Angel, its Group companies and Directors