Mutual Funds Commodities Research Tax Planning IPO Our Team Contact Us    
Google
Web www.equitybulls.com
Research

| More

State Bank of India - Collection efficiency trends allude to lower asset vulnerability - ICICI Securities

Posted On: 2020-08-01 22:09:30


State Bank of India's (SBI) Q1FY21 earnings exceeded our expectations on three key counts: 1) best-in-class collection efficiency - customers accounting for 90.5% of term loans met two or more EMI obligations and interest was deferred on only 11% of total interest accrued; 2) NIMs rebounded 30bps to 3.24% (after contracting in Q4FY20, implying it was a temporary blip); 3) cost flexibility visible even at such scale - operating costs (ex-employee) were down 8% YoY/25% QoQ. Credit cost was also managed at 1.9% (despite accelerated provisioning of Rs55bn towards HFC and Rs20bn Covid-related provisions). However, need for contingency buffer was not felt given comfortable collections, relatively lower vulnerability on asset portfolio, provision coverage (excluding AUCA of 67%) and anticipated resolutions in next 6-12 months. Improving visibility on sustenance of operating profit (>1.5% of assets), unlocking potential in subsidiaries and tempting valuations, more than outweigh near-term risks on equity dilution and industry-wide elevated credit costs. Maintain BUY with a target price of Rs255.

- Collection efficiency settles at best-in-class levels: Currently, 90.5% of its term loans (of Rs16trn) comprise customers meeting two or more EMI obligations implying 9.5% (Rs1.5trn) not paying any instalment, or only one EMI. Of this, 4.2% are in retail/SME (2% in home loans) and 2.2% in AAA and AA corporates - implying relatively low risk and more secured. Even including agri and working capital loans, interest deferral is ~11% of interest accrued (for Q1FY21) - suggesting agri/working capital is not adding >3% to overdue advances. As a proportion of respective sub-segments, this translates to ~6.5% less than two EMIs overdue loans for retail, SME, AAA & AA corporates and ~19% for A and below corporates.

- Accelerated specific credit cost; no need for contingency buffer: The bank made accelerated provisioning of Rs55bn towards HFC exposure (now 100% provided) and created Covid-related provisioning of Rs20bn on of SMA accounts of Rs133bn (100% interest + 15% principal) where it has received less than one EMI. Given that legacy accounts are adequately provided (corporate net NPLs of mere Rs105bn), recoveries of Rs110bn anticipated from resolutions (of steel, a couple of power and HFC exposures) in coming quarters and provision coverage of 67%, SBI does not feel the need to create Covid-related contingency buffer. Slippages (0.6%) in Q1FY21 were technical and may get upgraded post collection efforts. Given ongoing business disruption, we are conservatively building in credit cost of >200bps for FY21E.

- NIMs rebounded sharply: SBI has cut MCLR by 75bps post March (to 7%) and LDR ratio came off >400bps QoQ. Yet, it reported 30bps NIM expansion (benefitting from lower NPL drag and sharp cut in deposit rates). Going forward, deployment of surplus liquidity and resolutions may offset any downward pressure on NIMs.

- Cost agility and capital efficiency visible: Despite making Rs16bn of ad hoc provisions towards wage revision, employee cost increased ~9% YoY (~15% growth in FY20). Further impact of wage revision will be capped at Rs10bn. Also, operating expenses were curtailed sharply (down 8% YoY / 25% QoQ). In fact, contraction in loan- related fee income was not as stark as in others. Capital efficiency was visible with RWA/assets further contracting to 52% and profit accrual leading to 35bps rise in CET-1 to 10.14%. However, equity raising is imminent in the medium term.

Shares of STATE BANK OF INDIA was last trading in BSE at Rs.191.45 as compared to the previous close of Rs. 186.55. The total number of shares traded during the day was 6250526 in over 33874 trades.

The stock hit an intraday high of Rs. 194.9 and intraday low of 186.85. The net turnover during the day was Rs. 1198698537.


Source: Equity Bulls

Click here to send ur comments or to feedback@equitybulls.com


Disclaimer:The article above is a gist / extract of the original report prepared by the research firm / brokerage firm. This article is not to be considered as an offer to sell or a solicitation to buy any securities. This article is meant for general information only. www.equitybulls.com, its employees or owners or the research firms, its employees or owners won't be responsible for any liability that may arise from information, errors or omissions in these articles. www.equitybulls.com or its employees or owners / the research firms or its employees or clients or owners may from time to time hold positions in securities referred in this article. For detailed research reports, please contact the concerned research firm directly.





Other Headlines:

HeidelbergCement India - Play on better priced Central India; initiate with BUY - ICICI Securities

Healthcare - Diagnostics: Multiple tailwinds likely to emerge - ICICI Securities

Mazagon Dock Shipbuilders Ltd - IPO Review - ICICI Securities

Persistent Systems - 28th September 2020 - Angel Broking

Canara Bank - 28th September 2020 - Angel Broking

Subscribe to UTI Asset Management Company Limited - IPO Note - Angel Broking

Multiplex Sector - Mr. Jyoti Roy - DVP - Equity Strategist, Angel Broking Ltd

Sale of Sequent stake to Strides Pharma - Angel Broking

Subscribe to Mazagon Dock Shipbuilders Ltd - IPO Note - Angel Broking

JSW Energy - First big renewable step - ICICI Securities

V-MART Retail - Best play in value fashion segment; initiating with BUY - ICICI Securities

Gas sector - New winners and losers likely on policy changes in gas sector - ICICI Securities

Mazagon Dock Shipbuilders Limited - IPO Note - Geojit

UTI Asset Management Company Limited - IPO Note - Geojit

Preview on RBI Monetary Policy - Oct 2020 - Shanti Ekambaram

Rollover Report for September 2020 - October 2020: Angel Broking

Covid Recovery Pulse - Sep 25, 2020 - ICICI Securities

Quick Comment - Suven Pharmaceuticals - ICICI Securities

Derivatives Strategy - Sep 25, 2020 - Positional Option - ICICI Securities

Gladiator Stocks - Ramco Cement - ICICI Securities

IPO Review - UTI Asset Management Company - ICICI Securities

Stock of the Day - Zensar Technologies - Sep 25, 2020 - Angel Broking

Accenture Q4FY2020 Result - Angel Broking

Granules India receives ANDA approval - Angel Broking

Zydus Cadila receives US FDA approval - Angel Broking

Cipla - ANDA approval - Mr. Yash Gupta - Equity Research Associate, Angel Broking Ltd

Mindspace REIT - Mr. Yash Gupta - Equity Research Associate, Angel Broking Ltd

UTI AMC - IPO - Mr. Jaikishan Parmar - Sr. Equity Research Analyst, Angel Broking Ltd

Balkrishna Industries - Growth momentum continues - ICICI Securities

Rollover Analysis (September 25): Nifty starts October series with low OI amid high volatility

Derivatives View (September 25): Sell Bank Nifty in range of 20650-20750 - ICICI Securities

Rollover Analysis - Sept 20: Selling climax on expiry as markets crumble - YES Securities

Zydus Wellness - Leadership in niche categories; initiate at BUY - ICICI Securities

Power - Setting the stage - ICICI Securities

Company Update - Elgi Equipments - ICICI Securities

Nano Nivesh - The Anup Engineering - ICICI Securities

RBI OMO announcement of Rs. 10000 crore - Angel Broking

TCS deal win - Sep 24, 2020 - Angel Broking

View on Pre-Monetary Policy by Upasna Bhardwaj, Senior Economist at Kotak Mahindra Bank

US FDA approval to Zydus Cadila - Angel Broking

HDFC Securities Institutional Research Desk: Cement Sector Thematic - Spotting the sweet spot

Bharat Forge - Expectation hurdle remains steep - ICICI Securities

Auto

Mutual Fund Review - September, 2020 - ICICI Securities

UTI AMC announces IPO date - Angel Broking

Asian Paints - Mr. Amarjeet Maurya - AVP - Mid Caps, Angel Broking Ltd

Britannia Industries - Mr. Amarjeet Maurya - AVP - Mid Caps, Angel Broking Ltd

Hexaware Technologies (Not Rated): Hexaware accepts 475/share as final delisting price - ICICI Securities

CAMS IPO - Day 2 Subscription - Angel Boking

Chemcon Speciality Chemicals - IPO subscribed 12.62 times on second day - Angel Broking







Website Created & Maintained by : Chennai Scripts
West Mambalam, Chennai - 600 033,
Tamil Nadu, India

disclaimer copyright © 2005 - 2019