Hold State Bank of India: Ventura
Ventura has recommended hold rating on State Bank of India (SBI), in its May 27, 2013 research report.
June 01, 2013 / 13:07 IST
Ventura`s research report on State Bank of India
"State Bank of India’s (SBI) net profit plunged by 18.5 percent YoY to Rs 3,299.2 crore in Q4FY13, on account of lower interest income and higher provisioning for bad debts. NII declined by 4.4 percent YoY to Rs 11,078.4 crore in Q4FY13. Non interest income rose by 3.2 percent YoY to Rs 5,546.7 crore in Q4FY13. Drop in net income was on the back of higher operating expenses as well as elevated NPA provisions. NIM plunged by 51 bps YoY to 3.3 percent in Q4FY13 due to reduction in yield on advances.”“Domestic NIM stood at 3.6 percent, down 51 bps YoY as whole of the pension fund income was counted in the bank's book. International NIM stood at 1.50 percent, down 17 bps YoY, which is a function of the interest rate environment in those countries. The management has guided to maintain the domestic NIM at 3.6 percent for Q1FY14. Cost - income ratio of SBI increased to 48.5 percent in Q4FY13 from 45.2 percent in Q4FY12. In FY13, gross advances stood at Rs 10,78,557 crore, up 20.7 percent YoY with domestic advances up by 20 percent YoY at Rs 9,09,492 crore and international advances up by 24.6 percent YoY at Rs 1,69,065 crore. Yield on advances plunged by 51 bps YoY to 10.5 percent in FY13 on account of growth in volumes and company’s efforts of moving away from risky assets along with some accretion on NPA.” “State Bank of India posted a 18.5 percent YoY decline in its net profit to Rs 3,299.2 crore in Q4FY13, on account of lower interest income and higher provisioning for bad debts. NIM plunged by 51 bps YoY to 3.3 percent in Q4FY13 due to the reduction in yield on advances. Pressure on asset quality continued with GNPA ratio up by 31 bps YoY to 4.8 percent and NNPA ratio up by 28 bps YoY to 2.1 percent in FY13. The management has guided to maintain the domestic NIM at 3.6 percent in Q1FY14, but we believe that margins from overseas business might be under pressure due to excess liquidity, which will narrow down the yields. We recommend a HOLD on the stock. At the CMP of Rs 2,162, the stock is quoting at P/B of 1.1x FY14E and 0.9x FY15E its consensus earnings,” says Ventura research report. Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions. 
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