SBI - Asset quality deterioration shows no signs of respite - Ventura

Outlook

Muted NII growth, decline in non interest income, higher operating expenses and lower provision were the key highlights of Q2FY13 SBI results. Gross NPA and net NPAs increased sequentially while PCR stood at 62.8%. SBI is expected to remain a market performer over the next one year given the fact that despite robust operating performance, the deteriorating asset quality will remain an overhang on the stock At the CMP of Rs 2108 the stock is quoting at P/B of 1.6x FY13E and 1.4x FY14E consensus earnings Maintain Hold.

Key Takeaways

- SBI's advances grew at 17.9% on yoy basis driven largely by 27.3% growth in international loan book. Outstanding advances stood at Rs 9,56,000 crore. Deposits of Rs 11,33,644 Crore (+16.5 yoy however lagged the advances growth). C/D ratio as on Q2FY13 stood at 84.3%. CASA contribution declined by 267 bps on yoy basis mainly on account of 3.58% yoy de-growth in current account.

- NII grew by only 5.3% on yoy basis (due to stable yields and higher cost of funds). Non- interest income declined by 2.4% on yoy basis within which fee income was down 5.8% on yoy basis . Operating expenses were up 9.3% on yoy basis. However, decline in provisions and contingencies by 46% on yoy basis enabled the company to post 30.2% yoy growth at Rs 3658.1 crore

- SBI's gross NPLs increased sequentially by 16bps to 5.15% while the net NPLs increased sequentially by 22 bps at 2.4%. In terms of absolute amount Gross NPA and Net NPA as on Q2FY13 is Rs. 49202 crore and Rs 22615 crore. Provision coverage ratio stands at 62.8%. Total stressed assets as percentage of gross advances stood at 8.6%. Slippages were on the higher side at Rs 8495 crore mainly on account of sectors including mid corporate (Rs 3900 crore) and SME (Rs 2900 crore).

- Tier-1 CAR stands at 8.97% while capital adequacy stands at 12.63%.

- During the quarter, the bank booked an investment depreciation write-back of Rs 250 crore, given easing yields on bond portfolio and no further stress from the equity portfolio.

- Some of key accounts that were restructured during the quarter were Hotel Leela , Visa Steel, Up Power Corporation, Bharti Shipyard, ARSS Infrastructure, Jai Balaji and HCC.

- Of the Rs 47000 crore exposure to the power sector, the exposure to troubled SEBs is only Rs 3000 crore that too secured by state guarantees (UP and Tamil Nadu). 40% of the crop loans within the agri portfolio is collateralized by gold. Total gold loans stand at Rs 27000 crore .

Source : Equity Bulls

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