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State Bank of India (SBI) | Q3FY14 Result Update




IndiaNivesh Securities Pvt Ltd


16 Feb 2014





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State Bank of India (SBI) | Q3FY14 Result Update Asset quality deteriorates, higher provisions leads to y-o-y net profit de-growth | Result Update: Net Advances grew at healthy 17% y-o-y (+4% q-o-q) to Rs 11,489 bn, largely driven by large and mid corporate advances. Deposits grew 17% y-o-y (+4% q-o-q) to Rs 13,499 bn. CASA deposits ratio increased 31 bps q-o-q (-404 bps y-o-y) to 43.89% mainly due to 7% q-o-q increase in current account deposits. NIMs were stable at 3.19% on q-o-q basis. Net interest income increased at 13% y-o-y (+3% q-o-q) to Rs 126 bn. Asset quality continues to deteriorate further as Gross NPA and Net NPA sequentially increased 9 bps and 33 bps to 5.73% and 3.24% respectively. PCR (Provision Coverage Ratio) decreased to 58.32% (down 184 bps q-o-q and 317 bps y-o-y). Outlook and Valuation: SBI’s Q3FY14 results were as per street expectation on NII front. Higher provisions dragged the bank’s bottom line. On the positive side, bank was able to maintain it’s domestic NIMs at 3.5%. However, increase in fresh slippages was of concern. At CMP of Rs. 1,475/- (based on bloomberg estimates), the stock is trading at P/ABV multiple of 1.2x and 1.1x for FY14E and FY15E. Taking in to accounts all the negatives being factored in to the current stock price, we maintain BUY rating on the stock with price target of Rs. 1,926/- (P/ABV of 1.3x for FY15E).

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