Nov 09, 2012, 03.24 PM | Source: CNBC-TV18
Vaibhav Agrawal of Angel Broking explains to CNBC-TV18 that the SBI results are not good due to high NPA levels and low NII.
Vaibhav Agrawal (more)
VP Research, Banking, Angel Broking | Capital Expertise: Equity - Fundamental
Below is an edited transcript of the analysis on CNBC-TV18
Q: What do you make of SBI’s gross NPA being higher at 5.15 percent?
A: On the gross NPA, SBI has delivered a little bit better than Street expectations. This might have been possibly aided by strong recoveries and write-offs. But I think the net NPA is more or less in line or a bit higher. There is a Rs 2,000-crore sequential increase in net NPA and I think the reason for that is that it is not been able to provide that much because their NII itself has come in well below Street expectations. Overall, we would not call this a particularly good set of results.
Q: What was your expectation on slippages? What's your opinion on slippages of Rs 8,500 crore which is less than last quarter?
A: That is true. But last quarter, the slippage was exceptionally high and this quarter we estimated it to be in the range of Rs 8,000 crore. So the slippage is in line with Street expectations. The net NPA-level is a bit higher than estimated and the NII has disappointed.
Q: So you think the NII is the biggest disappointment combined with the asset quality that has caused the stock to dip from current levels? The restructured accounts are way above estimates- at Rs 4,694 crore as compared to around Rs 580 crore in the previous quarter - indicating that the restructured book has increased quite significantly and maybe the recoveries might not have been as high as expected.
A: I think restructured accounts are incrementally about Rs 4,600 crore. It is nothing positive but at par with other PSU banks results. There is nothing positive to read over there as well.
Q: What is your opinion with regards to fears of SBI’s asset-quality going forward? How worried would you be with regards to the gross NPA ratio delivered this time? How worse can it possibly get according to your forecast?
A: We are still building in an increase in their gross NPA ratio even from these levels up to possibly around 6 percent as well over the next 2-3 quarters. Clearly, SBI does not do write-offs to the extent that other PSUs do. So I think it is going to pile up a little bit more, because nothing in the environment and the management's guidance indicates that asset quality in the next two quarters will be anything much better than what it is currently.
Q: What do you make of the dip in the NII and what the bank might report in terms of credit growth? What would your estimates be?
A: The results of all PSU banks reveal a phenomenon of interest reversals due to the large amount of restructuring and chunky NPAs. So that is the main reason why even the interest income is getting reversed. This is again something which could possibly continue as long as even the NPA results remain elevated in the next quarter or two.