Analyst Research Report Snapshot

Title:

State Bank of India (SBIN) - Qtr. Update - Dtd. - February 14, 2013

Price:

$58.00

Provider:

Axis Capital Limited

Date:

15 Feb 2013

Pages:

6

Type:

AcrobatPDF

Companies referenced:

SBI.NS

Available for Immediate Download
Summary:

SBI’s operational performance was in line with stable margin and business growth. However, PAT was below estimate due to higher slippages of Rs 82 bn (71.6 bn in Q2) which led to higher provisioning. Despite loan restructuring of Rs 28 bn, outstanding restructured book declined 14% QoQ as certain loans were upgraded to standard category from restructured category on satisfactory performance (in compliance with new RBI guidelines). Bank expects revival in credit demand and indicated early shoots in January 2013. Margin to remain stable led by policy rate cuts and efficient deployment of surplus liquidity. Asset quality to improve from Q4 as management expects higher upgradation and recoveries, mainly from accounts dependent on government funds. This along with focus on higher collateral in agriculture segment will help in improving the asset quality trend. Management indicated that NPAs of ~Rs 20 bn (~25% of Q3FY13 slippages) have already been upgraded in Jan 2013. Valuation: We reduce our PAT estimates by 10% each for FY14 and FY15 to factor in higher NPA provisions. Maintain BUY with revised SOTP-based TP of Rs 2,800 [1.5 x FY15E ABV of Rs 1,508 (adj. for value and cost of invt) + Rs 539 value of invt] vs. Rs 2,850 earlier. Our TP implies upside of 26% from CMP of 2,214. We have factored in Rs 30 bn capital infusion in FY13 (2% dilution). The stock trades at 1.3x FY14E ABV of Rs 1,299 (Rs 1,333 earlier) and 1.1x FY15E ABV of Rs 1,508 (Rs 1,567 earlier) ex value and cost of investments. Regards, Praveen Agarwal (Executive Director – BFSI) Institutional Equity Research Axis Capital Ltd Tel.: + 91 22 4325 1102 Namesh Chhangani (AVP – BFSI) Institutional Equity Research Axis Capital Ltd Tel.: +91 22 4325 1127 Siddharth Goyal (AVP – BFSI) Institutional Equity Research Axis Capital Ltd Tel.: + 91 22 4325 1126

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