State Bank of India Result Updated

Please refer to important disclosures at the end of this report 1 Particulars ( ` cr) 3QFY12 2QFY12 % chg (qoq) 3QFY11 % chg (yoy) NII 11,466 10,422 10.0 9,050 26.7 Pre-prov. profit* 8,130 7,474 8.8 6,764 20.2 PAT 3,263 2,810 16.1 2,828 15.4 Source: Company, Angel Research; Note:*write back on investments netted from treasury loss For 3QFY2012, SBI’s standalone net profit increased by 15.4% yoy to ` 3,263cr, which were above street estimates. Sequential expansion in both domestic (32bp) and foreign NIM (4bp) was the major positive from the result. However, the asset quality continued to disappoint with gross and net NPA levels increasing sequentially by 18.1% and 16.6%, respectively. We recommend an Accumulate on the stock with a target price of ` 2,595. NIM improve further; asset quality continues to disappoint: During 3QFY2012, the bank’s net advances grew by 16.5% yoy (up 7.0% qoq), while deposits accretion was moderate at 13.9% yoy (up 2.9% qoq). The reported CASA ratio as of 3QFY2012 stood at 47.9% (47.8% in 2QFY2012 and 48.2% in 3QFY2011). The bank’s NIM increased for both domestic (up by a strong 32bp qoq to 4.4%) and foreign operations (up by 4bp qoq to 1.8%) on account of better yields. Adjusting for net loss on investments of ` 221cr, non-interest income declined by 9.6% yoy. On the asset-quality front, the bank’s annualised slippage ratio for the quarter remained above 4%+ levels (4.3%). Pressure on slippages was high from the agri, SME as well as corporate segment, while major industries contributing to higher slippages were aviation ( ` 1,184cr), iron and steel ( ` 667cr vs. ` 347cr in 2QFY2012) and textiles ( ` 462cr vs. ` 289cr in 2QFY2012). Outlook and valuation: At the CMP, the stock is trading at 1.6x FY2013E ABV (adjusting for value of subsidiaries). The bank’s asset quality has been under stress lately, however the pressures are expected to ease off going forward as domestic macro headwinds subside. Also, considering the bank’s dominant position and reach, strong savings market share gains, high fee income and superior earnings quality, and recent impressive performances on margin front, we recommend an Accumulate on the stock with a target price of ` 2,595. Key financials Y/E March ( ` cr) FY2010 FY2011 FY2012E FY2013E NII 23,671 32,526 43,085 49,665 % chg 13.4 37.4 32.5 15.3 Net profit 9,166 8,265 10,972 13,560 % chg 0.5 (9.8) 32.8 23.6 NIM (%) 2.5 3.0 3.5 3.5 EPS ( ` ) 144.4 130.1 172.8 203.3 P/E (x) 16.3 18.0 13.6 11.6 P/ABV (x) 2.4 2.4 2.2 1.8 RoA (%) 0.9 0.7 0.8 0.9 RoE (%) 15.7 13.3 16.9 17.5 Source: Company, Angel Research ACCUMULATE CMP ` 2,349 Target Price ` 2,595 Investment Period 12 Months Stock Info Sector Banking Market Cap ( ` cr) 149,165 Beta 1.1 52 Week High / Low 2960/1576 Avg. Daily Volume 741,289 Face Value ( ` ) 10 BSE Sensex 18,154 Nifty 5,522 Reuters Code SBI.BO Bloomberg Code SBIN@IN Shareholding Pattern (%) Promoters 59.4 MF / Banks / Indian Fls 18.7 FII / NRIs / OCBs 10.9 Indian Public / Others 11.0 Abs. (%) 3m 1yr 3yr Sensex (8.2) (0.8) 95.1 SBI 33.1 (14.7) 106.8 Vaibhav Agrawal 022 – 3935 7800 Ext: 6808 [email protected] Varun Varma 022 – 3935 7800 Ext: 6847 [email protected] State Bank of India Performance Highlights 3QFY2012 Result Update | Banking February 16, 2012

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State Bank of India Result Updated