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State Bank of India (SBI) | Q2FY14 Result Update




IndiaNivesh Securities Pvt Ltd


13 Nov 2013





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State Bank of India (SBI) | Q2FY14 Result Update NII in line with expectations, but increase in provisions leads to net profit down | Advances grew at a healthy pace of 19% y-o-y (+4% q-o-q) to Rs 11,031 bn, largely driven by large and mid corporate advances. Deposits grew at a moderate pace of 14% y-o-y increase (+3% q-o-q) to Rs 12,925 bn. However, CASA deposits decreased by 109 bps q-o-q (-137 bps y-o-y) to 43.58% mainly due to 9% q-o-q decrease in current account deposits. NIMs were up by 3 bps q-o-q (-26 bps y-o-y) to 3.19%. Net interest income increased at a moderate pace of 12% y-o-y (+6% q-o-q) to Rs 123 bn. Asset quality continues to deteriorate but at a slower pace as Gross NPA and Net NPA increased 8 bps and 8 bps to 5.64% and 2.91% sequentially respectively. PCR (Provision Coverage Ratio) was also stable at 60.16% (-44 bps q-o-q and -262 bps y-o-y). Outlook and Valuation: SBI’s Q2FY14 result was above expectation at NII front but higher provisions dragged the bottom line of the bank. On a positive note, the asset quality was stable as there was marginal increase in NPAs and fresh slippages were also decreased significantly. However, the increase in restructured assets will remain area of major concern. Overall, SBI’s Q2FY14 results were better on asset quality front. At CMP of Rs 1698, the stock is currently trading at (consolidated) P/ABV of 1.2x and 1.1x for FY14E and FY15E respectively. We continue to recommend BUY on SBI with target price of Rs 1926 (P/ABV of 1.3x for FY15E).

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