Hold SBI: Indiabulls Securities

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Indiabulls Securities Research has downgraded its rating on  SBI  to hold in its reports dated June 29, 2009.

"Despite a debilitating economic environment, State Bank of India (SBI) exhibited a strong bottom-line for FY09. The Bank's FY09 net profit increased 35.5% yoy to Rs 91.2 billion. While the growth in the first three quarters was led by NII, in Q4'09 it was dependent on other income. For the next few quarters, we foresee SBI's bottom-line to be pressured by declining yields, higher cost structure, and larger provisioning-outlay required due to rising delinquencies. It s advances increased 30.2% yoy and 7.7% qoq to Rs 5.4 trillion, chiefly led by international advances, and large- , mid-corporate, and SME loans. The SOTP fair-value estimate of Rs 1,874 indicates an upside of 6% over the current market price of Rs 1,765.10. The stock is currently trading at a P/B of 1.5x, which in our view is relatively high, considering the uncertainty surrounding the Bank's delinquencies and its life insurance, and asset management businesses. Therefore, we downgrade our rating to Hold, " says Indiabulls Securities' report.

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