MOSL: STATE BANK OF INDIA (Buy)-Healthy standalone operating performance marred by huge clean-up in Abs
​State Bank of India: Healthy standalone operating performance marred by huge clean-up in Abs
(SBIN IN, Mkt Cap USD32.8b, CMP INR308, TP INR375, 22% Upside, Buy)
- BIN parent: Reported PAT increased 1.2x YoY and 8% QoQ to INR28.1b (26% beat), led by a robust core PPoP performance (+27% YoY to ~INR118b). Key positives for 4QFY17 were: a) NNPAs fell 5% QoQ; 70% of corporate slippages of INR78b were from the already identified watch-list. b) Impressive NIM performance - adjusting for one-offs, NIM expanded ~8bp QoQ to 2.8%. c) Focus on granular retail loans (+21/9% YoY/QoQ) driven by broad-based growth across housing (+17% YoY), auto (+21% YoY) and personal loans (+30%).
- Parent asset quality: Net slippages fell marginally QoQ, but remained elevated at INR81.6b (net slippage ratio 2.2% annualized) v/s INR82.9b in 3Q. Strong operating profitability allowed SBIN to take higher provisions (INR117.4b; INR89.4b in 3Q). Absolute NNPA thus fell 5% QoQ to 3.7% of loans (3Q: 4.2%).
- Massive clean-up quarter for ABs: ABs reported net loss of ~INR60b in 4Q, driven by continued harmonization of accounting policy (esp. on asset quality) with parent. Consol. GNPA and NNPA stood at 9.1% and 5.2%, respectively.
- SBIN declared post-merger revised watch-list of INR324.7b (1.6% of loans), of which ~INR110b can be attributed to AB exposures. Power (34% of watch-list), Steel (11%) and Telecom (10%) remain the key monitorables here.
State Bank of India provides a range of products and services to personal, commercial enterprises, large corporates, public bodies and institutional customers. Its segments include Treasury, which includes the entire investment portfolio and trading in foreign exchange contracts and derivative contracts; Corporate/Wholesale Banking, which comprises the lending activities of Corporate Accounts Group, Mid Corporate Accounts Group and Stressed Assets Management Group; Retail Banking, which comprises branches in National Banking Group, which primarily includes Personal Banking activities, including lending activities to corporate customers having banking relations with branches in the National Banking Group, and Other Banking Business, which includes the operations of all the Non-Banking Subsidiaries/Joint Ventures other than SBI Life Insurance Co. Ltd. and SBI General Insurance Co. Ltd. The Company had approximately 22,500 branches and 58,000 ATMs.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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