Hold State Bank of India - Geojit BNP Paribas

- SBI has been downgraded to 'hold' from the earlier 'buy' rating and profit booking is recommended at higher levels. Currently, the stock is traded in the range of Rs.2155.

- 2QFY13 PAT at Rs.3660 crore is slightly better than market consensus estimates. However, asset quality disappointed again.

- SBI's provisions declined 25.7% qoq despite higher slippages due to the higher up gradations as current quarter calculated PCR (provision coverage ratio) declined by 290 bps to 54%.

- EPS is forecasted to rise 7% in FY13 and 3% in FY14 due to lower provisions as recoveries and up gradations improved.

- The stock is downgraded to 'hold' and is expected to trade in a band.

- Slippages moderated from Rs.108 billion to Rs. 85 billion qoq, but not at the expected level of Rs.60-70 billion.

- The bank has Rs.43 billion worth of restructured assets in the current quarter and high slippages.

- It seems that there is no meaningful trigger for a re-rating of PSU banks except the market expectation of a rate cut by RBI in early CY13.

Source : Equity Bulls

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