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MOSL: Morning India (12/February/18): 1. Automobile; 2. State Bank of India; 3. ONGC; 4. Coal India; 5. Hindustan Zinc; 6. BPCL

MOrning India (12/February/18): 1. Automobile; 2. State Bank of India; 3. ONGC; 4. Coal India; 5. Hindustan Zinc; 6. BPCL; 7. M&M; 8. Tata Steel; 9. HPCL; 10. Sun TV Network

 

Today’s top research idea

State Bank of India - Asset quality disappoints; Expect gradual recovery over FY19E

• SBIN reported a weak quarter with net slippages spiking up to INR267.8b (adversely impacted by divergence). Provisioning increased to INR188.8b, resulting in a loss of INR24.2b. On the positive side, 89% of corporate slippages came from stressed assets, resulting in a decline in net stressed assets to 8.4% of total loans. Core PPoP held stable led by modest growth in core other income while NII growth stood flat on sequential basis. While the core portfolio performance remains healthy, cleanup of residual stressed assets will remain an overhang in near term. We cut our FY18E/19E/20E earnings by 75%/20%/22% respectively and build in capital infusion of INR88b as announced by the government. We revise our PT to INR375 (1.4x FY20E ABV for bank) and maintain our BUY rating.

Piping hot news

Oil firms propose new MDR, banks yet to agree

• State-owned fuel retailers have proposed a merchant discount rate (MDR) of 0.65% for purchases using debit cards, but banks which set up the card swipe machines are yet to agree, three people aware of the matter said. Oil marketing companies, which are paying MDR, or card transaction fees, to banks on behalf of their dealers for a year now are trying to reduce their financial burden, while banks fear a lower MDR would hurt them.