SBI Associate Banks - Margins improve QoQ - Motilal Oswal

SBI: Associate banks 3QFY11; Margins improve QoQ; Loans +6% QoQ and +18% YoY; NPAs up 9% QoQ

On an aggregate basis, NII grew 7% QoQ (inline with loan growth of ~6% QoQ, indicating stable margins QoQ).

Other Income growth of ~7% YoY (up 6% QoQ), indicates moderate trading profits YoY (in-line with industry trend; however, fee income would have picked up).

Opex grew sharply at 40% YoY led by 57% YoY increase in employee expenses. While subsidiaries will have to make provisions for second pension, SBI (parent) is not impacted by 2nd pension option as all its employees are covered under PF as pension.

Asset quality performance is impressive for all but SBH. While for SBBJ and SBT GNPA declined ~5% QoQ, for SBM and SBP it grew ~7% QoQ.

On a QoQ basis, operating profits growth stood at 15%. However 22% QoQ increase in provision and higher tax rate led to 7% QoQ increase in PAT.

Motilal Oswal expects SBI's(Results on Jan 22) sequential loan growth to be in line with industry. Margins are likely to moderate by 10bps from 2QFY11 levels of ~3.4

Source : Equity Bulls

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