Views on State Bank of India 4QFY2014 results - Angel Broking

Views of Mr. Vaibhav Agrawal (VP Research – Banking, Angel Broking) on State Bank of India 4QFY2014 results:

"SBI reported healthy performance on the asset quality front while operating performance came ahead of our estimates. Slippages for the bank came much lower than expectations at Rs. 7,947cr (annualised slippage rate of 3.0%) as against Rs. 11,438cr in 3QFY2014 (annualised slippage rate of 4.4%). Recovery and upgrades came much higher at around Rs. 8400cr (probably on back of sale of assets to ARCs)against Rs. 2786cr in 3QFY2014. Lower slippages and healthy recoveries and upgrades resulted in 9.1% sequential decrease in absolute Gross NPA. The Gross and Net NPA ratios during the quarter came lower by 78bp and 67bp qoq respectively to 5.0% and 2.6%.

On the operating front, NII grew by 16.5% yoy (aided by 15.7% advances growth). Domestic margins remained largely flat sequentially at 3.49%. Non-interest income grew healthy by 18.7% yoy. Opex remained largely flat yoy. Pre-provisioning operating profit increased by 36.9% yoy. Provisioning expenses grew 40.9% yoy (NPA Provision increased by 48.1% yoy). PBT level earnings grew by 32.3% yoy but tax expense at Rs. 1696cr against Rs. 280cr in 4QFY2013 resulted in earnings de-growth by 7.8% yoy at Rs. 3,041cr.

The bank has witnessed significant asset quality improvement in current quarter. We await management comment regarding the asset quality performance during the quarter and also going ahead. The bank's core strength lies in its high CASA and fee income, which has supported its core profitability in current challenging times. Its strong capital adequacy also provides comfort. In our view, SBI's current valuations 1.2x FY2016E ABV factors in most of positives for the stock. As of now we maintain neutral on the stock as target price is achieved."

Source : Equity Bulls

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