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Company details
Price chart
Shareholding pattern
Price performance
(%) 1m 3m 6m 12m
Absolute 5.6 -5.1 -10.9 12.6
Relative -0.4 -2.1 -13.6 -0.6to Sensex
State Bank of India Reco: Buy
Stock Update
Play on economic recovery; Buy maintained CMP: Rs271
Key points
Credit to grow by 12-14%, margins may dip due to base rate cuts:
State Bank ofIndia (SBI) expects the overall loan book to grow in
the range of 12-14% with focuson low risk segments (better rated
corporates, retail, mortgages etc). The growthin overseas
operations will be slower than the domestic book due to a weak
globalenvironment. The bank has undertaken base rate cut by 30
basis points (BPS) inQ1FY2016 and has also reduced deposit rates in
the range of 25-50BPS. However,the re-pricing will happen with a
lag of around 12 months which could have someimpact on the net
interest margin (3.16% in Q4FY2015) in near term.
Asset quality trends to be better than peer banks: The asset
quality pressure
remains in near term due to troubles in certain sectors and some
bulky exposures;though it should remain within manageable limits.
The management suggested thatslippages from restructured loans
should sustain at ~15% level which is better thanthe other leading
public sector banks (PSBs). However, any notable improvement inthe
asset quality should be visible towards the end of the fiscal
driven by a recoveryin the economy. The provision coverage of 69%
is among the highest in the PSBs.
Capital ratios remain comfortable though capital infusion from
government likely:
SBI is among the better capitalised banks (compared with the
other PSBs) havingtier-1 capital adequacy ratio of 9.6% (FY2015).
While the bank has taken approvalto raise a capital of ~Rs15,000
crore, it has no immediate necessity to raise thecapital.
Meanwhile, the management expects some capital infusion from
government,which plans to infuse capital ($3 billion in FY2016) in
state-owned banks. Also, the
banks risk weightage assets have been growing at a modest rate
due to efficientutilisation of capital which may continue in the
coming period as well.
Play on economic recovery, maintain Buy: In the past few
quarters, SBI has shownimprovement in the operating performance and
a slowdown in fresh accretion of
non-performing assets. However, given its strong liability base
(CASA and retaildeposits constitute 92% of the total deposits) and
better capital ratios, the bank isbetter placed to benefit from a
revival in the economy. The bank is better providedon pension
provisions and employee count is expected to remain stable which
willimprove efficiency ratios. We expect the banks earnings to grow
at 35% CAGR overFY2015-17 resulting in return on assets (RoAs) of
~1%. We maintain our Buy ratingon the stock of SBI with an
SOTP-based price target of Rs378.
Price target: Rs378
Market cap: Rs204,892 cr
52 week high/low: Rs336/235
NSE volume: 156.5 lakh(no. of shares)
BSE code: 500112
NSE code: SBIN
Sharekhan code: SBIN
Free float: 309.1 cr(no. of shares)
ValuationsParticulars FY2013 FY2014 FY2015 FY2016E FY2017E
Net interest income (Rs cr) 44,331 49,282 55,015 60,802
71,133
Net profit (Rs cr) 14,105 10,892 13,102 17,862 23,773
EPS (Rs) 20.6 14.6 17.5 23.9 31.8
EPS growth (%) 18.2% -29.3% 20.3% 36.3% 33.1%
PE (x) 13.2 18.6 15.5 11.4 8.5
Book value (Rs/share) 139.5 150.3 163.9 182.3 206.7
P/BV (x) 2.0 1.8 1.7 1.5 1.3
Adj book value (Rs/share) 107.4 108.7 127.0 149.4 176.2
P/ABV (x) 2.5 2.5 2.1 1.8 1.5
RoE (%) 15.4 10.0 10.6 13.2 15.7
RoA (%) 1.0 0.6 0.7 0.8 1.0
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Profit and loss statement Rs cr
Particulars FY13 FY14 FY15 FY16E FY17E
Net interest income 44,331 49,282 55,015 60,802 71,133
Non-interest income 16,035 18,553 22,576 25,168 28,486
Net total income 60,366 67,835 77,591 85,970 99,619
Operating expenses 29,284 35,726 38,678 42,461 46,619
Pre-provisioning profit 31,082 32,109 38,914 43,509 53,000
Provisions 11,131 15,935 19,599 16,849 17,519
Profit before tax 19,951 16,174 19,314 26,660 35,482
Tax 5,846 5,282 6,212 8,798 11,709
Profit after tax 14,105 10,892 13,102 17,862 23,773
Balance sheet Rs cr
Particulars FY13 FY14 FY15 FY16E FY17E
Liabilities
Networth 98,884 118,282 128,438 142,121 160,331
Deposits 1,202,740 1,394,409 1,576,793 1,797,544 2,076,164
Borrowings 169,183 183,131 205,150 215,705 228,378
Other liabilities 95,455 96,413 137,698 148,714 160,611&
provisions
Total liabilities 1,566,261 1,792,235 2,048,080 2,304,084
2,625,483
Assets
Cash & balances 65,830 84,956 115,884 100,662 103,808with
RBI
Balances with banks 48,990 47,594 58,977 62,221 65,457&
money at call
Investments 350,927 398,308 495,027 567,743 621,000Advances
1,045,617 1,209,829 1,300,026 1,482,030 1,733,975
Fixed assets 7,005 8,002 9,329 10,729 12,338
Other assets 47,892 43,546 68,836 80,699 88,905
Total assets 1,566,261 1,792,235 2,048,080 2,304,084
2,625,483
Financials
Key ratios
Particulars FY13 FY14 FY15 FY16E FY17E
Per share data (Rs)
Earnings 20.6 14.6 17.5 23.9 31.8
Dividend 4.1 3.0 3.5 4.8 6.4
Book value 139.5 150.3 163.9 182.3 206.7
Adj. book value 107.4 108.7 127.0 149.4 176.2
Spreads (%)
Yield on advances 9.5 9.1 9.0 8.8 8.7
Cost of deposits 6.0 6.0 6.0 5.8 5.6
Net interest margins 3.3 3.2 3.1 3.1 3.1
Operating ratios (%)
Credit to deposit 86.9 86.8 82.4 82.4 83.5
Cost to income 48.5 52.7 49.8 49.4 46.8
CASA 44.8 42.9 40.4 41.2 41.4
Non interest income/ 26.6 27.4 29.1 29.3 28.6Total income
Assets/Equity (x) 15.9 15.5 15.6 16.1 16.3
Return ratios (%)RoE 15.4 10.0 10.6 13.2 15.7
RoA 1.0 0.6 0.7 0.8 1.0
Asset quality ratios (%)
Gross NPA 4.8 5.0 4.3 4.1 3.8
Net NPA 2.1 2.6 2.1 1.7 1.3
Growth Ratios (%)
Net interest income 2.4 11.2 11.6 10.5 17.0
Pre-provisioning profit -1.6 3.3 21.2 11.8 21.8
Profit after tax 20.5 -22.8 20.3 36.3 33.1
Advances 20.5 15.7 7.5 14.0 17.0
Deposits 15.2 15.9 13.1 14.0 15.5
Valuation ratios (%)
P/E 13.1 18.6 15.4 11.3 8.5P/BV 1.9 1.8 1.7 1.5 1.3
P/ABV 2.5 2.5 2.1 1.8 1.5
Capital adequacy (%)
CAR 12.9 12.4 12.0 10.2 9.9
Tier I 9.5 9.7 8.6 8.3 8.2
Sharekhan Limited, its analyst or dependant(s) of the analyst
might be holding or having a position in the companies mentioned in
the article.
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