Maintain 'hold' on SBI - TP Rs.2495 - Geojit BNP Paribas Financial Services

- Net Interest Income (NII) of Rs.11155 crore was ahead of market estimates due to better than expected domestic NIM (net interest margin).

- Deposit cost remained stable at 6.3% as against 5-8 bps qoq increase expectation.

- PAT at Rs.3396 crore increased 4.1% yoy.

- Other positives include a pick up in advances growth in 4Q and CASA improving 59 bps qoq.

- Restructured assets are 3.6% of advances, down 67 bps qoq mainly because SBI migrated Rs.15097 crores to standard category based on new guidelines for classification of restructured assets.

- Asset quality surprised with gross slippages again inching up from 3.6% to 3.9%.

- Management indicated that Rs. 2000 crore worth of loans are technical NPLs to be upgraded in 4QFY13.

- Slippages in the current quarter are mainly from Pharma and Steel companies in Karnataka and Orissa.

- Gross slippages, adjusted for the technical NPLs of Rs.2000 crore are INRs.6100 crore and at the higher end of our expectations of Rs.5000-6000 crore.

- Restructuring remains high with Rs.3500 crore in the pipeline and a further Rs.1700 croreb of Suzlon. Hence stress points will remain.

- No drastic turnaround in asset quality is expected except a gradual reduction in slippages, higher recoveries and up gradations.

- Retain 'hold' rating with a target price of Rs.2495.

Source : Equity Bulls

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