MOSL: STATE BANK OF INDIA (Buy)-Asset quality/margins surprise positively; one-off gains further boost earnings
STATE BANK OF INDIA: Asset quality/margins surprise positively; one-off gains further boost earnings
(SBIN IN, Mkt Cap USD35.4b, CMP INR282, TP INR350, 24% Upside, Buy)
- SBIN reported better-than-expected PAT of INR30.1b (+30% QoQ) in 2QFY20, led by robust NII and the stake sale in SBI Life (INR34.8b). The bank continued with ~35% corporate tax and will migrate to the new regime in 4QFY20.
- NII grew 7% QoQ to INR246b (our estimate: ~INR234b), led by 20bp sequential expansion in the domestic margin. Adj. PBT stood at INR15.7b versus INR18.1b in the year-ago period. For 1HFY20, PPoP grew 4% YoY, while PAT stood at INR53.2b v/s a loss of INR39.3b for 1HFY19.
- Other income grew 28% YoY to INR120.3b in 2QFY20, led by the stake sale in SBI Life. Core fee income was flat YoY at INR50.4b. Opex grew 12% YoY to INR184.2b, led by 17% YoY increase in employee expenses. SBIN made a provision of INR9.9b toward arrears of wages in the quarter.
- Loan growth stood at 9.6% YoY, driven by retail loans (+18.9% YoY), while the corporate book grew at a modest pace of 2.8% YoY. Deposit base increased 8% YoY with a CASA mix of 45.1% (stable QoQ).
- Fresh slippages declined to INR88b, with corporate slippages moderating to INR32.4b from INR53.5b in 1QFY20. Agri slippages at INR30.8b have largely come from two states that have announced a farm loan waiver. Higher write-offs of INR120.5b facilitated a 4.1% QoQ decline in GNPLs. Provision coverage ratio improved ~190bp QoQ to 62.9% (81.2% incl. TWO). SBIN made additional provision of IRN14b toward the stressed HFC, taking the total PCR to 20% and another INR26b toward the non-fund-based energy exposure. SMA 1 and SMA 2 book stands at ~INR93b v/s ~INR103b in 1QFY20.
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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