SBI - 3QFY2013 Result Review - Angel Broking

SBI (CMP: Rs. 2,216/ TP: Under Review)

State Bank of India reported subdued operating performance for 3QFY2013, as its net interest income (NII) and operating profit declined by 2.7% and 4.2% yoy, respectively. The bank has been aggressive in cutting its lending rates, so the decline in NII, was in-line with our expectations.

The bank witnessed continued pressures on the asset quality front, as elevated slippages and sequentially lower recoveries/upgrades resulted in 8.6% sequential increase in gross NPA levels, with net slippages being about Rs. 800cr higher than our estimates. As a result, in spite of slightly higher provisioning expenses than estimated by us, provisioning coverage ratio declined by about 130bp sequentially. At the current market price, the stock is trading at 1.4x FY2014E ABV (adjusting for value of subsidiaries 1.3x FY2014E ABV) vis-à-vis its historic range of 1.3-2.3x and median of 1.6x.

We recommend an Accumulate rating on the stock, however, the target price is under review.

Source : Equity Bulls

Keywords