State Bank of India’s (SBI) Net Interest Income (NII) delivered strong growth of 15% YoY at Rs 22,954 crs FY19 and delivered 1% QoQ increase. GNPA witnessed an addition of Rs 7,961 crs which was marginally lower than the past 10 quarter average of Rs 20,442 crs. The domestic credit was recorded at 14% YoY along with the whole bank credit growth surging at 12%. PAT was delivered in green and stood at Rs 862 crs as against the previous year’s loss at Rs 6,548 crs. The employee cost recorded 23.73% increases in FY19 as against 25.25% in FY18. Net Provisioning of Rs 16,502crs has been provided in Q4FY19 with a YoY increase of 41% and a QoQ increase of 174%. This is mainly due to Essar Steel, Bhushan Steel and Alok Industries being provisioned at a total of Rs 10,000 crs.
PAT is down at Rs 838 crs which is a QoQ decrease of 78%. This is in line with the higher provisioning done by the bank to subdue the effect of the previous defaults. The domestic retail loan book grew at 18.5% while the total loan book increased at 13%. NIM’s being declared at 2.78% increased by 28bps YoY / 2bps QoQ. The GNPA’s have reduced by 338 bps to 7.53%.
While addressing the concall for Q4, the chairman Mr Rajnish Kumar stressed on the point that the management is working towards improving the asset quality of the bank. This is expected to further improve the Cost/Income ratio of the bank, which currently is increased to 56.4% FY19 as against 52.6% FY18. The acknowledged accounts of Essar, Bhushan, Alok is expected to generate a total of Rs 16,000 crs with a haircut of 50%. The home loan segment consisted of 62% retail loans that registered a robust growth of 17.4% YoY.
The exposure to Housing Finance Companies (HFs) is at a total of Rs 62,511 crores. Advances to HFs are majorly backed up by private sector institutions. Total Portfolio purchases from NBFCs stood at Rs 19,000 crs Q4FY19.
Lending for the corporate sector was strong at 14.8% FY19, but the lending to agricultural and SME sector was marginally low at 7%. The upcoming monetary policy is expected to cut the rates by 25bps. The country has been subject to distress, experienced with subdued industrial activities and the global trade tensions. Rates were slashed with inflation being below estimates. But a further cut in interest rates might uptick the underlying inflation.
|Book Value (Rs)||236.2||245.5||247.5||280.1||317.6|
|Gross NPA (%)||6.9||10.9||7.5||6||5.4|
|Net NPA (%)||3.7||5.7||3.||1.7||1.2|
(Rs. in crores)
|Particulars||4QFY19||3QFY19||4QFY18||QoQ (%)||YoY (%)|
|Net interest income||2,29,538||2,26,910||1,99,743||1.2||14.9|
|Other operating expenses||82,279||69,293||73,317||18.7||12.2|
|Total operating expenses||1,87,059||1,81,012||1,65,859||3.3||12.8|
|Profit before Tax||4,311||66,188||-1,22,129||-93.5||-103.5|
|Total Tax Expenses||-4,072||26,639||-44,947||-115.3||-90.9|
|M-Cap||Rs 3,21,643 crs|
|Face Value||Rs 1.00|
|Bloomberg code||SBIN: IN|
SBI is trading at P/ABV of 1.5 for FY20E. Expected ROE for FY20E is at 11.8%. NIM has revised the estimate of 2.9%. RoA for FY20E is at 0.9%. The NNPAs is expected to decrease to 1.7% and the GNPAs have a revised outlook of 6%. We recommend BUY at the target price of Rs 385.
We expect RBI to cut benchmark rates in the forthcoming Monetary Policy and hence SBI should be a greater beneficiary, look out for this stock.