Company Report | Q4FY11 Result Update

LONG TERM INVESTMENT CALL

19 May 2011 ACCUMULATE

Industry Banking Q4FY11 Result Highlights

CMP (INR) 2355 State Bank of India (SBIN) registered a sharp decline in financial
Target (INR) 2775 performance with a disappointing 99% drop in its net profit plunged
52 week High/Low (INR) 3515/2138 from INR 1.8 bn in Q4FY10 to INR 210 mn in Q4FY11. This was the
Market Cap (INR BN) 153 consequence of the one time clean up exercise taken up by the bank. The
bank has aggressively set aside huge amount of funds towards provisions
3M Avg. Daily Volumes 2323170
P/BV FY12E for pension liability (INR 79.67 bn), gratuity (INR 15.65 bn) and teaser
1.8x
loans (INR 5 bn).
Shareholding Pattern (%)
The deposits of the bank on March 31, 2011 rose to INR 9.33 tn from INR
Others
11% 8.04 tn on March 31, 2010 recording a 16.14% growth yoy. This was
Institutions
17% driven by the improvement in CASA ratio from 46.67% in Q4FY10 to
48.66% in Q4FY11. Gross advances for the Q4FY11 were up by INR 1.3 tn
to INR 7.71 tn. This contributed towards the net interest income which
registered a growth of 19.89% (the value in Q4FY11 stood at INR 80.88
FII bn). In Q4FY11 net interest margin increased to 3.07% from 2.96% YoY.
13% Promoters
59%
Average cost of deposits came down by 54 bps to 5.26% in FY11 from
5.8% in FY10. The yield on advances in FY11 was also lower by 10 bps as
Stock Performance compared to 9.66% in FY10. The net interest margin for the financial year
2011 surged to 3.32% from 2.66% in the last financial year. The non
3500 interest income was marginally up by 6.81% owing to the decline in profit
on sale of investments, also the staff expenses increased by 17.46%.
3000

2500 Total provisions during the quarter were up by 82.10% due to a jump in
non performing assets. The deterioration in asset quality was evident
2000
from the gross NPA ratio surged to 3.28% in Q4FY11 from 3.05% in
1500 Q4FY10. The net NPA, however, fell marginally from 1.72% in Q4FY10 to
Dec
Aug
Jul

Sep
Jun

Jan
Nov
May

Oct

May
Feb

Mar

Apr

1.63% in Q4FY11. The provision coverage ratio at the end of last quarter
SBI NSE Nifty
stood at 64.95%.

Performance (%) The bank’s capital adequacy ratio in FY11 also descended to 11.98% from
1 Month 3 Months 1 Year 13.39% in FY10. This was again on account of the higher provisions made
SBI -13.3 -3.2 7.3 towards pension fund owing to wage revision of INR 79.27 bn.
NIFTY -6.0 4.1 7.5
* Source: Ace, Unicon Research Outlook & Valuation
Bank has guided the loan growth of 17-18% medium term; NIMs could
(INR in mn)
pick up from here on (management guided to 3.5% NIM in FY12); cost
Particulars Actual Estimates
efficiency should improve as much of the pain has already been taken.
NII 80581 90923
However, there are still questions on asset quality slippages,
Operating Profit 60797 72613
management suggests, will provide for it more aggressively than in
PAT 208 28434
recent past. We believe next 2-3 quarters we are likely to see some
* Source: Ace, Unicon Research
pressures on the stock. However, with much of the pain behind us, we
would look to accumulate on further weakness. At the CMP, stock trades
at 1.8x of its FY12E P/BV. We maintain Accumulate rating on the stock,
Analyst however, we reduce our target price to INR 2775 from INR 3262.
Shweta Rane | srane@uniconindia.in

Wealth Research, Unicon Financial Intermediaries. Pvt Ltd.

Email: wealthresearch@uniconindia.in
 Financials
(INR in mn)
Q4 FY11 Q4 FY10 Y-o-Y Q3 FY11 Q-o-Q
Interest income 217214 179656 20.91 214128 1.44
Interest expense 136633 112442 21.51 123630 10.52
Net Interest Income 80581 67214 19.89 90498 -10.96
Other Income 48155 45085 6.81 33139 45.31
Total Operating income 128735 112300 14.64 123637 4.12
Operating expenditure 67938 60361 12.55 55992 21.34
Operating Profit 60797 51939 17.06 67645 -10.12
Operating Profit (%) 27.99 28.91 -92 bps 31.59 -360 bps
Provisions 41570 23494 76.94 20515 102.63
PBT 19226 28443 -32.40 47130 -59.21
Tax 19019 9779 94.49 18849 0.90
PAT 208 18664 -98.89 28281 -99.27
EPS (INR.) 0.33 29.40 -98.89 44.54 -99.27
NIMs 3.32 2.96 36bps 3.61 -29bps
Source: Company, Unicon Research *Standalone

Wealth Research, Unicon Financial Intermediaries. Pvt Ltd.

Email: wealthresearch@uniconindia.in
 Unicon Investment Ranking Methodology

Rating Buy Accumulate Hold Reduce Sell

Return Range >= 20% 10% to 20% -10% to 10% -10% to -20% <= -20%

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Email: wealthresearch@uniconindia.in