SBI - Q1FY14 Result - Nirmal Bang Institutional

- Following weak operating performance, operating profit decline of 7.6% YoY, State Bank of India (SBI) posted net earnings of Rs32.4bn for 1QFY14, down 13.6% YoY, aided by higher treasury gains of Rs12bn and lower loan provisioning, down 18.8% YoY.

- Reported net earnings were 8.1%/6.4% below our/Bloomberg consensus estimates, respectively, amid deterioration of asset quality with fresh slippage of Rs137.6bn, compared to an average of Rs79.9bn of the last four quarters, and the provision coverage ratio declining 598bps sequentially.

- Factoring in the results, we have realigned our gross nonperforming asset or GNPA/net non-performing asset or NNPA/restructured loan book/net earnings estimates for FY14 and FY15 and also reduced our target price on the stock to Rs2,000 based on SOTP valuation (valuing the standalone entity at 1.7x FY14E ABV) from Rs2,640 (2.0x FY14E ABV) earlier, while retaining our Buy rating on it.

Source : Equity Bulls

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