SBI - Q1FY2014 Result Review - Angel Broking

SBI reported poor operating performance for the quarter, primarily dragged by asset quality challenges. NII for the bank grew by 3.5% yoy to Rs. 11,512cr (vs. advance growth of 15.6%, as NIMs declined 41bp yoy to 3.2%). In-line with sectoral trends, Non-interest income for the bank grew by 28.1% yoy to Rs. 4,474cr, largely aided by treasury gains of Rs. 1,201 as compared to Rs. 221cr in 1QFY2013. Overall, pre-provisioning profit for the bank de-grew by 7.6% yoy to Rs. 7,551cr.

On the asset quality front, the bank reported disappointed set of numbers, as slippages surged to 5.3% (annualized slippage rate of 2.7% in previous quarter), while recoveries and upgrades came in lower sequentially. Hence, Gross NPA levels increased sequentially by 19.0%, while Net NPA levels increased by much higher 36.6% qoq (amongst the worst within our coverage banks). Provisioning expenses increased by 16.7% yoy to Rs. 2,866cr. Thus, bottom-line de-grew by 13.6% yoy to Rs. 3,241cr. Considering recent macro developments in an overall weak economic environment, we remain cautious on asset quality pressures for the sector. At CMP, the stock trades at a valuation of 0.9x FY2015E P/ABV. We would recommend a Neutral rating on the stock.

Source : Equity Bulls

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