State Bank of India
India Equity Research Financials
May 21, 2012
State Bank of India
BUY
Target Price (INR) 2,582 NPLs fall, while operational strength is retained Rating ↔ Fall in the slippage, sharp increase in the upgradation and recovery surprised positively in the Mar12 quarter. Despite a fall in incremental Last Price (INR) 1,941 SBIN IN NPL, provision remained high, leading to a rise in the provision Bloomberg code SBI.BO coverage ratio to 68%. Even with a 10‐bp sequential fall in the NIM, Reuters code 3.44 FY12 saw large expansion, led by higher yields and reducing bulk Avg. Vol. (3m)(mn) 7.44 Avg. Val.(3m)(INRbn) deposits. Strong NII growth and modest operating expenses led to a 2,530 / 1,571 52‐wk H/L (INR) 57% y‐o‐y growth in operating profit. We raise our net profit forecast 16,153 Sensex up to c40% as we lower incremental NPL assumption and NPL MCAP (INRbn/USDbn) 1,302 / 23.90 provisions forecast in FY13f–FY14f. We factor rise in the PCR over the Shareholding (%) 12/11 03/12 next three years to 74%. We rollover the TP to Mar13 and raise it to 59.4 61.6 INR2,582; it values the stock at 1.28x one‐year forward consolidated Promoters 17.1 18.7 MFs, FIs, Banks P/B. Maintain Buy. Lower‐than‐estimated NIM is the key risk factor. 8.7 7.9 FIIs 6.1 6.5
6.7 7.3
Public Others
Stock Chart (Relative to Sensex) 2,700
2,375
2,050
1,725
Despite moderation in 4QFY12, FY12 saw large NIM expansion The NII for the Mar12 quarter rose c45% y‐o‐y. Despite a 10‐bp sequential contraction, NIM (global) saw large expansion in FY12, driven by upward re‐ pricing of loans and reduction in the bulk deposits. The management has guided NIM to stay above 3.5% in FY13f. The low growth in high‐cost wholesale deposits and an increase in the yield on investments are likely to protect the NIM. We estimate NIM to remain close to the current level in FY13f at 3.56% (estimated NIM at 3.52% in FY11). Core fees and forex income growth rose 13% y‐o‐y after remaining muted in the last few quarters. Strong NII growth and modest operating expenses led to the 57% y‐o‐y growth in operating profit.
Slippage ratio falls, coupled with large upgradation
1,400 May11
Sep11
J an12
St Bk of India
Stock Perfm. (%)
May1
Sensex Rebased
Gross slippage during the Mar12 quarter, at INR43.8bn, was 2% of the loans (annualized), lowest in the last five quarters. The gross NPL ratio declined 17‐bp sequentially to 4.44% and net NPL ratio 40‐bp to 1.82% at the end of Mar12. The provision coverage ratio rose 5.6% q‐o‐q to 68%. For FY12, the incremental NPL was 1.86%, 24‐bp below our estimates, leading to lower‐than‐estimated NPL provisions. The management has guided a further reduction in slippage in the Jun12 quarter. We lower our incremental NPL assumption by up to 15‐bp and NPL provision forecast by up to 27% for FY13f–FY14f. We factor the rise in the provision coverage ratio over the next three years to 74%.
1m
3m
1yr
‐15.3
‐19.7
‐17.6
‐8.2
‐8.0
‐6.9
Financials (INRbn)
03/12
03/13f
03/14f
NII
432.9
492.1
577.1
33.1
13.7
17.3
Operating profit
315.7
368.4
426.7
A.PAT
117.1
145.0
175.1
Sh o/s (diluted)
671.0
671.0
671.0
A.EPS (INR)
179.3
216.1
260.9
34.0
23.8
20.8
6.3
6.2
5.9
Domestic loan growth slowed to c14% y‐o‐y due to moderation in the mid‐ corporate and retail segment (6.4% and 10.9%, respectively). The proportion of the mid‐corporate and retail segments fell 2% and 1% to 22% and 24%, respectively, in FY12. The management remains cautious on the contracting pipeline of the demand for capex due to a low investment cycle. We lowered our loan growth assumption by 3% to 19% for FY13f.
11.1
9.0
7.4
Rollover TP to Mar13 to INR2,582; maintain Buy
1.7
1.4
1.2
0.9 15.7
1.0 16.2
1.0 17.1
Absolute Rel. to Sensex
YoY (%)
YoY (%) Equity/Assets (%) P/E (x) P/B (Adj) (x) RoA (% ) RoE (% ) Quarterly Trends
06/11
09/11
12/11
03/12
Op. income (INRbn)
132.3
138.5
135.9
169.7
15.8
28.1
32.6
40.5
PAT (INRbn)
Please refer to the disclaimer towards the end of the document.
Loan growth slows; management cautious on low capex demand
We raise our TP marginally to INR2,582 and rollover to Mar13. The TP values the stock at 1.28x the one‐year forward consolidated P/B. We maintain Buy. Lower‐than‐estimated NIM is the key risk factor. Chandana Jha, +91 022 66842854 [email protected]
India Equity Research
State Bank of India
Exhibit 1: Mar12 quarter’s results snapshot (standalone) (INRbn)
Mar11
Dec11
Q‐o‐q (%)
Mar12
Y‐o‐y (%)
Interest income Interest expense Net interest income Other income Operating income Operating expense Operating profit Provisions & contingencies Tax Net profit Key ratios (%) Loan growth Deposit growth SB deposit growth NIM GNPL NNPL
217.21 136.63 80.58 48.15 128.73 67.93 60.80 41.56 19.01 0.23
276.61 161.96 114.66 21.26 135.92 63.32 72.60 24.07 15.90 32.63
3.74 4.92 2.07 147.61 24.84 16.41 32.19 30.45 51.37 24.13
286.96 169.92 117.04 52.64 169.68 73.71 95.97 31.40 24.06 40.50
32.11 24.36 45.24 9.33 31.81 8.51 57.84 ‐24.44 26.57 17509.87
19.75 13.25 26.20 3.07 3.28 1.63
16.46 13.88 15.33 4.05 4.61 2.22
‐1.81 0.72 ‐4.05 ‐0.16 ‐0.17 ‐0.40
14.65 14.60 11.27 3.89 4.44 1.82
‐5.10 1.35 ‐14.92 0.82 1.16 0.19
Source: Company, Avendus Research
Exhibit 2: Mar12 quarter’s results snapshot (consolidated) (INRbn)
Mar11
Dec11
Q‐o‐q (%)
Mar12
Y‐o‐y (%)
Interest income Interest expense Net interest income Other income Operating income Operating expense Operating profit Provisions & contingencies Tax Minority interest Net profit
300.72 186.39 114.33 100.71 215.05 130.57 84.47 44.45 25.33 2.24 12.45
381.60 229.42 152.17 49.96 202.14 102.44 99.69 34.07 21.34 1.10 43.18
4.61 5.46 3.33 171.84 44.98 67.57 21.77 12.90 43.32 75.06 16.77
399.19 241.96 157.24 135.83 293.06 171.66 121.40 38.47 30.59 1.92 50.42
32.74 29.81 37.52 34.86 36.28 31.47 43.71 ‐13.46 20.75 ‐14.17 304.90
Source: Company, Avendus Research
Large NIM expansion in FY12, despite marginal fall in 4QFY12 Exhibit 3: Reported NIM for the quarter (%)
Exhibit 4: Estimated NIM for the year (%)
4.2
3.6
3.9
3.3
3.6
2.9
3.3
2.6
3.0 Mar11
Jun11
Sep11
Source: Company, Avendus Research
Dec11
Mar12
2.3 Mar10 Mar11 Mar12 Mar13f Mar14f Mar15f Source: Company, Avendus Research
Financials
2
India Equity Research
State Bank of India
Deceleration in SB deposits continued, leading to fall in CASA ratio Exhibit 5: Yield on loans and cost of deposits (%)
Exhibit 6: SB deposits growth and CASA ratio
12
50
SB deposit growth(RHS) 30
10
49
25
8
48
20
6
47
15
Yield on Loans
4 Mar11
CASA ratio
Cost of Deposits
46 Jun11
Sep11
Dec11
Mar12
Source: Company, Avendus Research
10 Mar11
Jun11
Sep11
Dec11
Mar12
Source: Company, Avendus Research
Fee income remained muted, even with some revival in CEB Exhibit 7: Growth in commission, exchange and brokerage (CEB), forex income and trading gains 60
CEB (%)
Forex Income (%)
Trading gain / loss (INR mn; RHS) 8,000
40
4,000
20
0
0
‐4,000
‐20
‐8,000
‐40
‐12,000 Mar11
Jun11
Sep11
Dec11
Mar12
Source: Company, Avendus Research
Low slippage and large upgradation leads to fall in NPL ratios Exhibit 8: Slippage and NPL provisions of SBIN (standalone) Mar11
Jun11
Sep11
Dec11
Mar12
56.5
61.2
82.7
81.6
43.8
3.0
3.2
4.2
3.9
2.0
Recovery
10.4
12.0
7.4
10.3
16.0
Upgradation
(INRbn) Slippage ‐as % of loans
16.2
18.8
10.4
9.4
31.2
Gross NPL ratio (%)
3.3
3.5
4.2
4.6
4.4
Net NPL ratio (%)
1.6
1.6
2.0
2.2
1.8
343.5
349.1
354.2
376.1
427.4
4.5
4.5
4.5
4.4
4.9
32.6
27.8
29.2
30.1
28.4
1.7
1.4
1.5
1.4
1.3
Restructured loans ‐as % of loans NPL provisions for quarter ‐as % of loans Source: Company, Avendus Research
Financials
3
India Equity Research
State Bank of India
Exhibit 9: Incremental GNPL/starting loans (%)
Exhibit 10: NPL provisions/assets and PCR (%)
Incremental GNPL / starting loans (%) Gross NPL ratio (%) Net NPL ratio (%) (RHS)
NPL provisions / assets
PCR (RHS)
6.0
3.0
0.92
80
4.5
2.5
0.69
65
3.0
2.0
0.46
50
1.5
1.5
0.23
35
1.0
0.00
0.0 Mar07
Mar09
Mar11
Mar13f Mar15f
20 Mar07
Source: Company, Avendus Research
Mar09
Mar11
Mar13f Mar15f
Source: Company, Avendus Research
Raise net profit forecast up to c40% for FY13–FY14 on low NPL estimates Net profit for FY12 was significantly above our estimates mainly owing to a lower‐than‐estimated rise in the incremental NPL in the Mar12 quarter. For FY12, the incremental NPL was 1.86%, 24‐bp below our forecast, leading to lower‐than‐estimated NPL provisions. The management has guided further improvement in the asset quality with continued reduction in the slippage in the Jun12 quarter. We lower our assumption for the incremental NPL in FY13f by 15‐bp to 1.25% and reduce our NPL provision forecast by up to 27%. This has led to net profit forecast rising up to c40% for FY13f–FY14f. Exhibit 11: Earnings revision summary (standalone)
‐‐‐‐‐‐‐‐‐‐‐‐ FY13f ‐‐‐‐‐‐‐‐‐‐‐‐
(INRbn)
‐‐‐‐‐‐‐‐‐‐‐‐ FY14f ‐‐‐‐‐‐‐‐‐‐‐‐
Old
New
Var (%)
Old
New
Var (%)
Net interest income
500.9
492.1
‐1.8
596.6
577.1
‐3.3
Operating income
664.0
675.4
1.7
788.1
788.3
0.0
Operating profit
342.7
368.4
7.5
407.3
426.7
4.8
Loan‐loss provisions
170.4
131.8
‐22.7
193.4
141.3
‐27.0
Net profit
103.3
145.0
40.3
127.8
175.1
37.0
Source: Company, Avendus Research
Rollover TP to Mar13 to INR2,582; maintain Buy We estimate the mean one‐year forward P/E and P/B for the consolidated bank for the 12‐month period ended 18May12, at 7.15x and 1.19x, respectively. Exhibit 12: Average P/E and P/B until 18May12
1‐month
3‐month
6‐month
12‐month
6.87 1.15
7.14 1.19
6.67 1.11
7.15 1.19
P/E P/B Source: Company, Avendus Research
Excluding the share of non‐bank subsidiaries (INR38.6/share), we estimate the mean one‐year forward P/E and P/B for the consolidated bank for the 12‐month period ended 18May12 at 7.37x and 1.29x, respectively. We apply these to our forecast EPS and book value (consolidated) for Mar12 to arrive at fair values of INR2,405/share and INR2,392/share, respectively. Exhibit 13: Average P/E and P/B until 18May12 (excluding value of non‐bank subsidiaries) P/E P/ B
1‐month
3‐month
6‐month
12‐month
7.07 1.18
7.34 1.26
6.89 1.19
7.37 1.29
Source: Company, Avendus Research
Financials
4
India Equity Research
State Bank of India
The fair value of SBIN’s banking business, at INR2,544/share, is a weighted average, where we assign a weight of 30% to our DCF‐based fair value and 35% each to our P/E and P/B‐based fair values. In the DCF method, we assume the semi‐explicit period growth for the consolidated SBIN at 16% and RoA of 1.0% at the end of the semi‐explicit period. We add the fair value of the non‐bank subsidiaries, at INR38.6/share, to arrive at a Mar13 TP of INR2,582. The TP values the stock at 1.28x and 7.67x the one‐ year forward adjusted P/B and EPS, respectively. We maintain a Buy rating. Exhibit 14: TP based on the PE, PB and DCF methods
P/E
Weights Fair value (INR)
P/B
DCF Fair value of consolidated SBIN
35%
35%
30%
Weighted average
2,405
2,392
2,883
2,544
Source: Company, Avendus Research
Exhibit 15: 1‐year forward P/E
Exhibit 16: 1‐year forward P/ABV
20
3.0 1‐year forward P/E (X) 12‐months moving average
16
2.5
12
2.0
8
1.5
4
1.0
0 Apr07
Jun08
Aug09
Oct10
Source: Bloomberg, Avendus Research
Jan12
1‐year forward P/ABV (X) 12‐months moving average
Mar13
0.5 Apr07
Jun08
Aug09
Oct10
Jan12
Mar13
Source: Bloomberg, Avendus Research
Risk factors f Higher‐than‐assumed loan growth, driven by high‐cost deposits, may result in a lower‐than‐ estimated NIM. f A sharp rise in the incremental NPL may lead to higher‐than‐estimated loan‐loss provisions, providing a downward risk to earnings.
Financials
5
India Equity Research
State Bank of India
Financials and valuations (standalone) Income statement (INRbn) Fiscal year ending Net interest income Fee income Trading profit Other income Total operating income Total operating expense Operating profit Provision for bad debt Other provision PBT (reported) Total taxes PAT (reported) (+) Share in assoc. earnings Less: Minority interest Prior period items Net income (reported) Avendus net income Shares outstanding (mn) Avendus dil. shares (mn) Avendus EPS (INR)
Decomposition of RoA (%) 03/12 432.9 135.2 ‐9.2 17.5 576.4 260.7 315.7 115.5 15.4 184.8 67.8 117.1 0.0 0.0 0.0 117.1 117.1 671 671 174.5
03/13f 492.1 151.6 16.4 15.2 675.4 306.9 368.4 131.8 20.3 216.4 71.4 145.0 0.0 0.0 0.0 145.0 145.0 671 671 216.1
03/14f 577.1 180.0 18.5 12.7 788.3 361.6 426.7 141.3 24.2 261.3 86.2 175.1 0.0 0.0 0.0 175.1 175.1 671 671 260.9
03/15f 686.5 216.2 21.5 11.2 935.5 428.1 507.3 165.2 28.5 313.7 103.5 210.2 0.0 0.0 0.0 210.2 210.2 671 671 313.2
14.7 33.1 3.8 37.2 41.7 34.0
18.5 13.7 12.1 14.1 23.8 23.8
21.8 17.3 18.7 7.2 20.8 20.8
21.9 19.0 20.1 16.9 20.0 20.0
75.1 23.5 54.8 20.3 36.7
72.9 22.5 54.6 21.5 33.0
73.2 22.8 54.1 22.2 33.0
73.4 23.1 54.2 22.5 33.0
03/12 6.7 0.0 832.8 839.5 10,436.5 861.7 1,217.5 13,355.2 971.6 3,122.0 8,675.8 50.7 535.1 13,355.2
03/13f 6.7 0.0 949.2 955.9 12,304.7 880.3 1,369.7 15,510.6 1,120.1 3,436.6 10,281.1 53.4 619.5 15,510.6
03/14f 6.7 0.0 1,090.0 1,096.7 14,999.9 929.3 1,553.0 18,578.9 1,290.7 3,968.8 12,520.0 58.2 741.2 18,578.9
03/15f 6.7 0.0 1,258.8 1,265.5 18,342.6 931.9 1,797.9 22,338.0 1,497.5 4,629.2 15,256.3 62.0 892.9 22,338.0
83.1 29.9 23.6 21.8 5.1
83.6 27.9 22.9 21.4 4.7
83.5 26.5 22.2 20.9 4.1
83.2 25.2 21.6 20.5 3.5
Growth ratios (%)
03/12 3.38 1.06 0.06 4.50 2.03 2.47 0.90 0.05 0.07 0.53 0.91
03/13f 3.40 1.05 0.22 4.67 2.12 2.55 0.91 0.05 0.09 0.49 1.00
03/14f 3.38 1.06 0.18 4.62 2.12 2.50 0.83 0.06 0.09 0.51 1.03
03/15f 3.35 1.06 0.16 4.57 2.09 2.48 0.81 0.06 0.08 0.51 1.03
RoA Assets / Equity RoE
0.91 17.18 15.72
1.00 1.03 16.08 16.61 16.15 17.06
1.03 17.32 17.79
Key Ratios
Loans Net interest income Fee income Provision for bad debt Avendus net income Avendus EPS
Operating ratios (%) NII/operating income Fee income/operating income Operating profit margin Net profit margin Effective Tax rate
Balance sheet (INRbn) Fiscal year ending Equity capital Preference capital Reserves and surplus Net worth Deposits Total borrowings Other liabilities and provisions Total liabilities Cash and bank balances Investments Loans Fixed assets Other assets Total assets Business Ratios (%) Loan / Deposit Investment / Deposit SLR Investment / Deposit SLR Investment / NDTL Debenture / Investment
Fiscal year ending Net interest income Fee income Other income Operating income Operating expenses Operating profit Loan loss provisions Provision for investments Other provisions Tax Net profit
Fiscal year ending Valuation ratios (x) P/E (on Avendus EPS) P/BV P/Adjusted BV Dividend yield (%) Per share ratios (INR) Basic Reported EPS (INR) Diluted Reported EPS (INR) Reported Book Value (BV) Adjusted Book Value (ABV) Dividend per share (INR) Return / Profitability Ratios (%) Yield on advances Yield on investments Cost of deposits Net interest margin Fee income/ Op revenue Trading profit/Op revenue Op expense/ Op revenue Capitalization Ratios (%) Equity / Assets Loans / Assets Investments / Assets Dividend payout Internal capital growth Capital adequacy Asset Quality Gross NPL ratio Net NPL ratio Net NPL / networth Loan‐loss reserve / Gross NPL Loan provisions / NII Loan provisions / Total loans Productivity / Efficiency ratios Business per branch (INRmn) Net profit per employee (INRmn)
03/12
03/13f
03/14f
03/15f
11.1 1.6 1.7 2.1
9.0 1.4 1.4 2.2
7.4 1.2 1.2 2.6
6.2 1.0 1.0 3.2
179.3 179.3 1,251.1 1,162.1 41.5
216.1 216.1 1,424.5 1,343.6 42.7
260.9 260.9 1,634.4 1,634.4 51.0
313.2 313.2 1,886.0 1,886.0 61.6
10.0 7.9 5.7 3.5 23.5 45.2 0.9
9.8 7.8 5.7 3.6 22.5 45.4 1.0
9.8 7.6 5.6 3.5 22.8 45.9 1.0
9.8 7.3 5.6 3.5 23.1 45.8 1.0
6.3 65.0 23.4 23.8 13.7 13.9
6.2 66.3 22.2 19.7 13.9 12.9
5.9 67.4 21.4 19.5 14.7 12.3
5.7 68.3 20.7 19.7 15.4 11.8
4.4 1.8 18.8 60.0 26.7 1.3
4.8 1.8 19.0 64.3 26.8 1.3
4.7 1.5 16.6 69.8 24.5 1.1
4.6 1.2 14.8 73.9 24.1 1.1
1,351.5 1,563.9 1,866.8 2,233.7 0.5 0.6 0.7 0.9
Financials
6
India Equity Research
State Bank of India
Financials and valuations (consolidated) Income statement (INRbn) Fiscal year ending Net interest income Fee income Trading profit Other income Total operating income Total operating expense Operating profit Provision for bad debt Other provision PBT (reported) Total taxes PAT (reported) (+) Share in assoc. earnings Less: Minority interest Prior period items Net income (reported) Avendus net income Shares outstanding (mn) Avendus dil. shares (mn) Avendus EPS (INR)
Decomposition of RoA (%) 03/12 578.8 151.0 ‐6.2 153.5 877.1 468.6 408.6 134.7 27.8 246.1 86.4 159.7 0.0 6.3 0.0 153.4 153.4 671 671 228.6
03/13f 666.2 170.9 34.0 159.6 1,030.6 555.1 475.6 156.8 26.1 292.6 102.4 190.2 0.0 4.4 0.0 185.7 185.7 671 671 276.8
03/14f 780.8 204.3 38.5 188.2 1,211.8 667.4 544.4 157.0 29.3 358.1 125.4 232.8 0.0 5.4 0.0 227.4 227.4 671 671 338.9
03/15f 917.5 246.3 44.6 224.9 1,433.2 788.8 644.4 170.9 35.1 438.4 153.4 284.9 0.0 6.4 0.0 278.5 278.5 671 671 415.0
15.6 27.1 ‐3.9 23.9 42.9 35.9
18.6 15.1 13.1 16.5 19.1 21.1
20.9 17.2 19.6 0.1 22.4 22.4
21.0 17.5 20.5 8.9 22.4 22.5
66.0 17.2 46.6 17.5 35.1
64.6 16.6 46.1 18.0 35.0
64.4 16.9 44.9 18.8 35.0
64.0 17.2 45.0 19.4 35.0
03/12 6.7 0.0 1,092.8 1,099.6 14,146.9 1,054.1 1,999.0 18,299.6 1,275.9 4,609.5 11,636.7 70.0 707.5 18,299.6
03/13f 6.7 0.0 1,258.4 1,265.1 16,382.8 800.0 2,675.2 21,123.0 1,354.7 5,106.2 13,804.1 60.1 797.9 21,123.0
03/14f 6.7 0.0 1,461.1 1,467.8 19,815.8 836.4 3,034.0 25,153.9 1,567.2 5,896.4 16,686.4 57.8 946.1 25,153.9
03/15f 6.7 0.0 1,710.9 1,717.6 23,968.2 861.5 3,492.2 30,039.5 1,826.2 6,843.5 20,186.2 54.9 1,128.6 30,039.5
82.3 32.6 25.2 23.5 5.7
84.3 31.2 24.3 23.2 5.7
84.2 29.8 23.5 22.6 5.4
84.2 28.6 22.9 22.1 5.0
Growth ratios (%)
03/12 3.34 0.87 0.84 5.05 2.70 2.35 0.77 0.05 0.11 0.52 0.89
03/13f 3.39 0.87 0.98 5.23 2.82 2.41 0.80 0.05 0.08 0.55 0.94
03/14f 3.39 0.88 0.97 5.24 2.89 2.35 0.68 0.04 0.08 0.57 0.98
03/15f 3.33 0.89 0.97 5.20 2.86 2.33 0.62 0.04 0.08 0.59 1.00
RoA Assets / Equity RoE
0.89 18.33 16.34
0.94 0.98 17.27 17.57 16.16 17.14
1.00 17.99 18.02
Key Ratios
Loans Net interest income Fee income Provision for bad debt Avendus net income Avendus EPS
Operating ratios (%) NII/operating income Fee income/operating income Operating profit margin Net profit margin Effective Tax rate
Balance sheet (INRbn) Fiscal year ending Equity capital Preference capital Reserves and surplus Net worth Deposits Total borrowings Other liabilities and provisions Total liabilities Cash and bank balances Investments Loans Fixed assets Other assets Total assets Business Ratios (%) Loan / Deposit Investment / Deposit SLR Investment / Deposit SLR Investment / NDTL Debenture / Investment
Fiscal year ending Net interest income Fee income Other income Operating income Operating expenses Operating profit Loan loss provisions Provision for investments Other provisions Tax Net profit
Fiscal year ending Valuation ratios (x) P/E (on Avendus EPS) P/BV P/Adjusted BV Dividend yield (%) Per share ratios (INR) Basic Reported EPS (INR) Diluted Reported EPS (INR) Reported Book Value (BV) Adjusted Book Value (ABV) Dividend per share (INR) Return / Profitability Ratios (%) Yield on advances Yield on investments Cost of deposits Net interest margin Fee income/ Op revenue Trading profit/Op revenue Op expense/ Op revenue Capitalization Ratios (%) Equity / Assets Loans / Assets Investments / Assets Dividend payout Internal capital growth Capital adequacy Asset Quality Gross NPL ratio Net NPL ratio Net NPL / networth Loan‐loss reserve / Gross NPL Loan provisions / NII Loan provisions / Total loans Productivity / Efficiency ratios Business per branch (INRmn) Net profit per employee (INRmn)
03/12
03/13f
03/14f
03/15f
8.5 1.2 1.4 2.1
7.0 1.0 1.1 2.5
5.7 0.9 1.0 3.0
4.7 0.8 0.6 3.5
235.0 235.0 1,638.6 1,436.9 39.9
276.8 276.8 1,885.2 1,702.0 47.9
338.9 338.9 2,187.3 2,013.5 58.1
415.0 415.0 2,559.6 3,371.7 68.4
10.3 7.7 6.0 3.5 17.2 (0.7) 53.4
10.1 7.8 6.0 3.5 16.6 3.3 53.9
10.0 7.4 6.0 3.5 16.9 3.2 55.1
10.1 7.0 6.0 3.5 17.2 3.1 55.0
6.0 63.6 25.2 16.8 14.7 12.3
6.0 65.4 24.2 16.9 14.0 11.9
5.8 66.4 23.4 16.8 14.9 11.3
5.7 67.2 22.8 16.1 15.8 10.9
4.4 2.0 21.7 56.5 23.3 1.2
4.5 1.7 19.5 62.7 23.5 1.1
4.4 1.5 17.7 66.6 20.1 0.9
4.3 1.4 17.4 68.0 18.6 0.8
1,374.0 1,583.3 1,884.9 2,245.2 0.6 0.7 0.8 0.9
Financials
7
India Equity Research
State Bank of India
Analyst Certification The following analyst(s) is(are) primarily responsible for this report and, certifies(y) that the opinion(s) on the subject company(ies) and its security(ies) and any other views or forecasts expressed herein accurately reflect their personal view(s). They further certify that no part of their compensation was, is or will be directly or indirectly related to the specific recommendation(s) or views contained in this research report: Chandana Jha
Disclosures Meaning of Avendus Securities Private Limited’s equity research ratings The rating represents the expected change in the price of the stock over a horizon of 12 months. Buy: more than +20%
Add: +10% to +20%
Hold: ‐10% to +10%
Reduce: ‐10% to ‐20%
Sell: less than ‐20%
Proportion of ratings in each category and investment banking relationships (%) At the end of March 2012
Buy
Add
Hold Reduce
Sell
NR
Total
Proportion of ratings in each category
29.1
33.3
17.4
11.6
1.4
7.2
100.0
0.0
8.7
8.3
0.0
0.0
20.0
5.8
Proportion of companies to whom material investment banking services were offered during the previous 12 months
Analyst disclosures None of the analysts involved in the preparation of this research report or a member of his/her household is an officer, director or supervisory board member of any of the company(ies) that is/are the subject of this research report. None of the analysts involved in the preparation of this research report or members of his/her household hold any financial interest in the securities of the company(ies) that is/are the subject of this research report. None of the analysts involved in the preparation of this research report have received or purchased shares of the subject company prior to the public offering of those shares.
Disclosures on potential conflicts of interest for Avendus Securities Private Limited and/or its associate companies (Avendus) as on May 18, 2012 As on the above mentioned date the shareholdings of Avendus does not exceed 5% of the total issued share capital of State Bank of India (SBIN). As on the above mentioned date, the shareholdings of SBIN does not exceed 5% of the total issued share capital of Avendus. Avendus does not hold any other financial interest in SBIN, which is significant in relation to the research recommendation. Avendus is not a market maker or liquidity provider in the securities of the relevant issuer or in any related derivatives. Avendus has not been a lead manager or co‐lead manager of a publicly disclosed offer of securities of SBIN or in any related derivatives over the previous 12 months. Over the previous 12 months, Avendus has not been party to any agreement with SBIN relating to the provision of other investment banking services that do not entail the disclosure of any confidential commercial information. Avendus is not party to any agreement with the subject company(ies) of this research report relating to the production of this research report.
Share price history and rating changes
3,300 SBIN (Initiated on Jul 20, 09)
Rating, Date, TP (INR)
2,850
Buy, 16Feb, 2,577
Buy, 16Aug, 2,845
Buy, 18Apr, 2,577
Buy, 13Feb, 2,577 Buy, 27Mar, 2,577 Buy, 21May, 2,582
2,400 Buy, 11Nov, 2,353
Buy, 06Jan, 2,353
1,950
1,500 May11
Jul11
Aug11
Oct11
Dec11
Feb12
Mar12
May12
Financials
8
India Equity Research
State Bank of India
Disclaimer This document has been prepared by Avendus Securities Private Limited (ASPL). This document is meant for the use of the intended recipient only. Though dissemination to all intended recipients is simultaneous, not all intended recipients may receive this document at the same time. This document is neither an offer nor solicitation for an offer to buy and/or sell any securities mentioned herein and/or official confirmation of any transaction. This document is provided for assistance only and is not intended to be, and must not be taken as, the sole basis for an investment decision. The user assumes the entire risk of any use made of this information. Each recipient of this document should make such investigation as he deems necessary to arrive at an independent evaluation, including the merits and risks involved, for investment in the securities referred to in this document and should consult his own advisors to determine the merits and risks of such investment. The investment discussed or views expressed may not be suitable for all investors. This document has been prepared on the basis of information obtained from publicly available, accessible resources. ASPL has not independently verified all the information given in this document. Accordingly, no representation or warranty, express or implied, is made as to accuracy, completeness or fairness of the information and opinion contained in this document. The information given in this document is as of the date of this document and there can be no assurance that future results or events will be consistent with this information. Though ASPL endeavors to update the information contained herein on reasonable basis, ASPL, its associate companies, their directors, employees, agents or representatives (ASPL and its affiliates) are under no obligation to update or keep the information current. Also, there may be regulatory, compliance or other reasons that may prevent us from doing so. ASPL and its affiliates expressly disclaim any and all liabilities that may arise from information, error or omission in this connection. ASPL and its affiliates shall not be liable for any damages whether direct, indirect, special or consequential, including lost revenue or lost profits, which may arise from or in connection with the use of this document. This document is strictly confidential and is being furnished to you solely for your information. This document and/or any portion thereof may not be duplicated in any form and/or reproduced or redistributed without the prior written consent of ASPL. This document is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of the United States or Canada or is located in any other locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law or regulation or which would subject ASPL and its affiliates to any registration or licensing requirements within such jurisdiction. Persons in whose possession this document comes should inform themselves about and observe any such restrictions. ASPL and its affiliates may be performing or seeking to perform investment banking and other services for any company referred to in this document. Affiliates of ASPL may have issued other reports that are inconsistent with and reach a different conclusion from the information presented in this document. This communication is exempt from the financial promotion restriction (in Section 21 of the Financial Services And Markets Act,2000 (FSMA)) relating to the communication of an invitation or inducement to engage in investment activity on the grounds that it is made to an investment professional. Any investment to which this communication relates is only available to investment professionals. Any persons who do not have professional experience in such investments should not rely on this communication. ASPL and its affiliates may have interest/positions, financial or otherwise, in the companies mentioned in this document. In order to provide complete transparency to our clients, we have incorporated disclosures about interests of analysts and about potential conflicts of interest of ASPL and its associate companies in this document. This should, however, not be treated as an endorsement of the view expressed in the document. ASPL is committed to providing high‐quality, objective and unbiased research to our investors. To this end, we have policies in place to identify, consider and manage potential conflicts of interest and protect the integrity of our relationships with investing and corporate clients. Employee compliance with these policies is mandatory. Any comment or statement made herein are solely those of the analyst and do not necessarily reflect those of ASPL.
OUR OFFICES Avendus Securities Private Limited Mumbai: 6th Floor, B Quadrant, IL&FS Financial Centre, Bandra Kurla Complex, Bandra (E), Mumbai ‐ 400 051 T: +91 22 6648 0050 F: +91 22 6684 2870 Avendus Capital Private Limited Mumbai: 5th Floor, B Quadrant, IL&FS Financial Centre, Bandra Kurla Complex, Bandra (E), Mumbai ‐ 400 051 T: +91 22 6648 0050 F: +91 22 66480040 Bangalore: The Millenia Tower, A ‐ 10th Floor, No 1 & 2 Murphy Road, Ulsoor, Bangalore ‐ 560 008, India
T: +91 80 6648 3600 F: +91 80 6648 3636
New Delhi: Suite 22A/B, The Aman Resort, Lodhi Road, New Delhi ‐ 110 003, India
T: +91 11 4535 7500 F: +91 11 4535 7540
London:
Avendus Capital (U.K.) Private Limited, 33, St James's Square, London, SW1Y 4JS
T: +44 203 159 4353 F: +44 207 661 9400
Avendus Securities Private Limited
SEBI Registration No: BSE CM ‐ INB011292639 | NSE CM‐ INB231294639 | NSE F&O ‐ INF231294639
Financials
9
May 21, 2012
State Bank of India
BUY
Target Price (INR) 2,582 NPLs fall, while operational strength is retained Rating ↔ Fall in the slippage, sharp increase in the upgradation and recovery surprised positively in the Mar12 quarter. Despite a fall in incremental Last Price (INR) 1,941 SBIN IN NPL, provision remained high, leading to a rise in the provision Bloomberg code SBI.BO coverage ratio to 68%. Even with a 10‐bp sequential fall in the NIM, Reuters code 3.44 FY12 saw large expansion, led by higher yields and reducing bulk Avg. Vol. (3m)(mn) 7.44 Avg. Val.(3m)(INRbn) deposits. Strong NII growth and modest operating expenses led to a 2,530 / 1,571 52‐wk H/L (INR) 57% y‐o‐y growth in operating profit. We raise our net profit forecast 16,153 Sensex up to c40% as we lower incremental NPL assumption and NPL MCAP (INRbn/USDbn) 1,302 / 23.90 provisions forecast in FY13f–FY14f. We factor rise in the PCR over the Shareholding (%) 12/11 03/12 next three years to 74%. We rollover the TP to Mar13 and raise it to 59.4 61.6 INR2,582; it values the stock at 1.28x one‐year forward consolidated Promoters 17.1 18.7 MFs, FIs, Banks P/B. Maintain Buy. Lower‐than‐estimated NIM is the key risk factor. 8.7 7.9 FIIs 6.1 6.5
6.7 7.3
Public Others
Stock Chart (Relative to Sensex) 2,700
2,375
2,050
1,725
Despite moderation in 4QFY12, FY12 saw large NIM expansion The NII for the Mar12 quarter rose c45% y‐o‐y. Despite a 10‐bp sequential contraction, NIM (global) saw large expansion in FY12, driven by upward re‐ pricing of loans and reduction in the bulk deposits. The management has guided NIM to stay above 3.5% in FY13f. The low growth in high‐cost wholesale deposits and an increase in the yield on investments are likely to protect the NIM. We estimate NIM to remain close to the current level in FY13f at 3.56% (estimated NIM at 3.52% in FY11). Core fees and forex income growth rose 13% y‐o‐y after remaining muted in the last few quarters. Strong NII growth and modest operating expenses led to the 57% y‐o‐y growth in operating profit.
Slippage ratio falls, coupled with large upgradation
1,400 May11
Sep11
J an12
St Bk of India
Stock Perfm. (%)
May1
Sensex Rebased
Gross slippage during the Mar12 quarter, at INR43.8bn, was 2% of the loans (annualized), lowest in the last five quarters. The gross NPL ratio declined 17‐bp sequentially to 4.44% and net NPL ratio 40‐bp to 1.82% at the end of Mar12. The provision coverage ratio rose 5.6% q‐o‐q to 68%. For FY12, the incremental NPL was 1.86%, 24‐bp below our estimates, leading to lower‐than‐estimated NPL provisions. The management has guided a further reduction in slippage in the Jun12 quarter. We lower our incremental NPL assumption by up to 15‐bp and NPL provision forecast by up to 27% for FY13f–FY14f. We factor the rise in the provision coverage ratio over the next three years to 74%.
1m
3m
1yr
‐15.3
‐19.7
‐17.6
‐8.2
‐8.0
‐6.9
Financials (INRbn)
03/12
03/13f
03/14f
NII
432.9
492.1
577.1
33.1
13.7
17.3
Operating profit
315.7
368.4
426.7
A.PAT
117.1
145.0
175.1
Sh o/s (diluted)
671.0
671.0
671.0
A.EPS (INR)
179.3
216.1
260.9
34.0
23.8
20.8
6.3
6.2
5.9
Domestic loan growth slowed to c14% y‐o‐y due to moderation in the mid‐ corporate and retail segment (6.4% and 10.9%, respectively). The proportion of the mid‐corporate and retail segments fell 2% and 1% to 22% and 24%, respectively, in FY12. The management remains cautious on the contracting pipeline of the demand for capex due to a low investment cycle. We lowered our loan growth assumption by 3% to 19% for FY13f.
11.1
9.0
7.4
Rollover TP to Mar13 to INR2,582; maintain Buy
1.7
1.4
1.2
0.9 15.7
1.0 16.2
1.0 17.1
Absolute Rel. to Sensex
YoY (%)
YoY (%) Equity/Assets (%) P/E (x) P/B (Adj) (x) RoA (% ) RoE (% ) Quarterly Trends
06/11
09/11
12/11
03/12
Op. income (INRbn)
132.3
138.5
135.9
169.7
15.8
28.1
32.6
40.5
PAT (INRbn)
Please refer to the disclaimer towards the end of the document.
Loan growth slows; management cautious on low capex demand
We raise our TP marginally to INR2,582 and rollover to Mar13. The TP values the stock at 1.28x the one‐year forward consolidated P/B. We maintain Buy. Lower‐than‐estimated NIM is the key risk factor. Chandana Jha, +91 022 66842854 [email protected]
India Equity Research
State Bank of India
Exhibit 1: Mar12 quarter’s results snapshot (standalone) (INRbn)
Mar11
Dec11
Q‐o‐q (%)
Mar12
Y‐o‐y (%)
Interest income Interest expense Net interest income Other income Operating income Operating expense Operating profit Provisions & contingencies Tax Net profit Key ratios (%) Loan growth Deposit growth SB deposit growth NIM GNPL NNPL
217.21 136.63 80.58 48.15 128.73 67.93 60.80 41.56 19.01 0.23
276.61 161.96 114.66 21.26 135.92 63.32 72.60 24.07 15.90 32.63
3.74 4.92 2.07 147.61 24.84 16.41 32.19 30.45 51.37 24.13
286.96 169.92 117.04 52.64 169.68 73.71 95.97 31.40 24.06 40.50
32.11 24.36 45.24 9.33 31.81 8.51 57.84 ‐24.44 26.57 17509.87
19.75 13.25 26.20 3.07 3.28 1.63
16.46 13.88 15.33 4.05 4.61 2.22
‐1.81 0.72 ‐4.05 ‐0.16 ‐0.17 ‐0.40
14.65 14.60 11.27 3.89 4.44 1.82
‐5.10 1.35 ‐14.92 0.82 1.16 0.19
Source: Company, Avendus Research
Exhibit 2: Mar12 quarter’s results snapshot (consolidated) (INRbn)
Mar11
Dec11
Q‐o‐q (%)
Mar12
Y‐o‐y (%)
Interest income Interest expense Net interest income Other income Operating income Operating expense Operating profit Provisions & contingencies Tax Minority interest Net profit
300.72 186.39 114.33 100.71 215.05 130.57 84.47 44.45 25.33 2.24 12.45
381.60 229.42 152.17 49.96 202.14 102.44 99.69 34.07 21.34 1.10 43.18
4.61 5.46 3.33 171.84 44.98 67.57 21.77 12.90 43.32 75.06 16.77
399.19 241.96 157.24 135.83 293.06 171.66 121.40 38.47 30.59 1.92 50.42
32.74 29.81 37.52 34.86 36.28 31.47 43.71 ‐13.46 20.75 ‐14.17 304.90
Source: Company, Avendus Research
Large NIM expansion in FY12, despite marginal fall in 4QFY12 Exhibit 3: Reported NIM for the quarter (%)
Exhibit 4: Estimated NIM for the year (%)
4.2
3.6
3.9
3.3
3.6
2.9
3.3
2.6
3.0 Mar11
Jun11
Sep11
Source: Company, Avendus Research
Dec11
Mar12
2.3 Mar10 Mar11 Mar12 Mar13f Mar14f Mar15f Source: Company, Avendus Research
Financials
2
India Equity Research
State Bank of India
Deceleration in SB deposits continued, leading to fall in CASA ratio Exhibit 5: Yield on loans and cost of deposits (%)
Exhibit 6: SB deposits growth and CASA ratio
12
50
SB deposit growth(RHS) 30
10
49
25
8
48
20
6
47
15
Yield on Loans
4 Mar11
CASA ratio
Cost of Deposits
46 Jun11
Sep11
Dec11
Mar12
Source: Company, Avendus Research
10 Mar11
Jun11
Sep11
Dec11
Mar12
Source: Company, Avendus Research
Fee income remained muted, even with some revival in CEB Exhibit 7: Growth in commission, exchange and brokerage (CEB), forex income and trading gains 60
CEB (%)
Forex Income (%)
Trading gain / loss (INR mn; RHS) 8,000
40
4,000
20
0
0
‐4,000
‐20
‐8,000
‐40
‐12,000 Mar11
Jun11
Sep11
Dec11
Mar12
Source: Company, Avendus Research
Low slippage and large upgradation leads to fall in NPL ratios Exhibit 8: Slippage and NPL provisions of SBIN (standalone) Mar11
Jun11
Sep11
Dec11
Mar12
56.5
61.2
82.7
81.6
43.8
3.0
3.2
4.2
3.9
2.0
Recovery
10.4
12.0
7.4
10.3
16.0
Upgradation
(INRbn) Slippage ‐as % of loans
16.2
18.8
10.4
9.4
31.2
Gross NPL ratio (%)
3.3
3.5
4.2
4.6
4.4
Net NPL ratio (%)
1.6
1.6
2.0
2.2
1.8
343.5
349.1
354.2
376.1
427.4
4.5
4.5
4.5
4.4
4.9
32.6
27.8
29.2
30.1
28.4
1.7
1.4
1.5
1.4
1.3
Restructured loans ‐as % of loans NPL provisions for quarter ‐as % of loans Source: Company, Avendus Research
Financials
3
India Equity Research
State Bank of India
Exhibit 9: Incremental GNPL/starting loans (%)
Exhibit 10: NPL provisions/assets and PCR (%)
Incremental GNPL / starting loans (%) Gross NPL ratio (%) Net NPL ratio (%) (RHS)
NPL provisions / assets
PCR (RHS)
6.0
3.0
0.92
80
4.5
2.5
0.69
65
3.0
2.0
0.46
50
1.5
1.5
0.23
35
1.0
0.00
0.0 Mar07
Mar09
Mar11
Mar13f Mar15f
20 Mar07
Source: Company, Avendus Research
Mar09
Mar11
Mar13f Mar15f
Source: Company, Avendus Research
Raise net profit forecast up to c40% for FY13–FY14 on low NPL estimates Net profit for FY12 was significantly above our estimates mainly owing to a lower‐than‐estimated rise in the incremental NPL in the Mar12 quarter. For FY12, the incremental NPL was 1.86%, 24‐bp below our forecast, leading to lower‐than‐estimated NPL provisions. The management has guided further improvement in the asset quality with continued reduction in the slippage in the Jun12 quarter. We lower our assumption for the incremental NPL in FY13f by 15‐bp to 1.25% and reduce our NPL provision forecast by up to 27%. This has led to net profit forecast rising up to c40% for FY13f–FY14f. Exhibit 11: Earnings revision summary (standalone)
‐‐‐‐‐‐‐‐‐‐‐‐ FY13f ‐‐‐‐‐‐‐‐‐‐‐‐
(INRbn)
‐‐‐‐‐‐‐‐‐‐‐‐ FY14f ‐‐‐‐‐‐‐‐‐‐‐‐
Old
New
Var (%)
Old
New
Var (%)
Net interest income
500.9
492.1
‐1.8
596.6
577.1
‐3.3
Operating income
664.0
675.4
1.7
788.1
788.3
0.0
Operating profit
342.7
368.4
7.5
407.3
426.7
4.8
Loan‐loss provisions
170.4
131.8
‐22.7
193.4
141.3
‐27.0
Net profit
103.3
145.0
40.3
127.8
175.1
37.0
Source: Company, Avendus Research
Rollover TP to Mar13 to INR2,582; maintain Buy We estimate the mean one‐year forward P/E and P/B for the consolidated bank for the 12‐month period ended 18May12, at 7.15x and 1.19x, respectively. Exhibit 12: Average P/E and P/B until 18May12
1‐month
3‐month
6‐month
12‐month
6.87 1.15
7.14 1.19
6.67 1.11
7.15 1.19
P/E P/B Source: Company, Avendus Research
Excluding the share of non‐bank subsidiaries (INR38.6/share), we estimate the mean one‐year forward P/E and P/B for the consolidated bank for the 12‐month period ended 18May12 at 7.37x and 1.29x, respectively. We apply these to our forecast EPS and book value (consolidated) for Mar12 to arrive at fair values of INR2,405/share and INR2,392/share, respectively. Exhibit 13: Average P/E and P/B until 18May12 (excluding value of non‐bank subsidiaries) P/E P/ B
1‐month
3‐month
6‐month
12‐month
7.07 1.18
7.34 1.26
6.89 1.19
7.37 1.29
Source: Company, Avendus Research
Financials
4
India Equity Research
State Bank of India
The fair value of SBIN’s banking business, at INR2,544/share, is a weighted average, where we assign a weight of 30% to our DCF‐based fair value and 35% each to our P/E and P/B‐based fair values. In the DCF method, we assume the semi‐explicit period growth for the consolidated SBIN at 16% and RoA of 1.0% at the end of the semi‐explicit period. We add the fair value of the non‐bank subsidiaries, at INR38.6/share, to arrive at a Mar13 TP of INR2,582. The TP values the stock at 1.28x and 7.67x the one‐ year forward adjusted P/B and EPS, respectively. We maintain a Buy rating. Exhibit 14: TP based on the PE, PB and DCF methods
P/E
Weights Fair value (INR)
P/B
DCF Fair value of consolidated SBIN
35%
35%
30%
Weighted average
2,405
2,392
2,883
2,544
Source: Company, Avendus Research
Exhibit 15: 1‐year forward P/E
Exhibit 16: 1‐year forward P/ABV
20
3.0 1‐year forward P/E (X) 12‐months moving average
16
2.5
12
2.0
8
1.5
4
1.0
0 Apr07
Jun08
Aug09
Oct10
Source: Bloomberg, Avendus Research
Jan12
1‐year forward P/ABV (X) 12‐months moving average
Mar13
0.5 Apr07
Jun08
Aug09
Oct10
Jan12
Mar13
Source: Bloomberg, Avendus Research
Risk factors f Higher‐than‐assumed loan growth, driven by high‐cost deposits, may result in a lower‐than‐ estimated NIM. f A sharp rise in the incremental NPL may lead to higher‐than‐estimated loan‐loss provisions, providing a downward risk to earnings.
Financials
5
India Equity Research
State Bank of India
Financials and valuations (standalone) Income statement (INRbn) Fiscal year ending Net interest income Fee income Trading profit Other income Total operating income Total operating expense Operating profit Provision for bad debt Other provision PBT (reported) Total taxes PAT (reported) (+) Share in assoc. earnings Less: Minority interest Prior period items Net income (reported) Avendus net income Shares outstanding (mn) Avendus dil. shares (mn) Avendus EPS (INR)
Decomposition of RoA (%) 03/12 432.9 135.2 ‐9.2 17.5 576.4 260.7 315.7 115.5 15.4 184.8 67.8 117.1 0.0 0.0 0.0 117.1 117.1 671 671 174.5
03/13f 492.1 151.6 16.4 15.2 675.4 306.9 368.4 131.8 20.3 216.4 71.4 145.0 0.0 0.0 0.0 145.0 145.0 671 671 216.1
03/14f 577.1 180.0 18.5 12.7 788.3 361.6 426.7 141.3 24.2 261.3 86.2 175.1 0.0 0.0 0.0 175.1 175.1 671 671 260.9
03/15f 686.5 216.2 21.5 11.2 935.5 428.1 507.3 165.2 28.5 313.7 103.5 210.2 0.0 0.0 0.0 210.2 210.2 671 671 313.2
14.7 33.1 3.8 37.2 41.7 34.0
18.5 13.7 12.1 14.1 23.8 23.8
21.8 17.3 18.7 7.2 20.8 20.8
21.9 19.0 20.1 16.9 20.0 20.0
75.1 23.5 54.8 20.3 36.7
72.9 22.5 54.6 21.5 33.0
73.2 22.8 54.1 22.2 33.0
73.4 23.1 54.2 22.5 33.0
03/12 6.7 0.0 832.8 839.5 10,436.5 861.7 1,217.5 13,355.2 971.6 3,122.0 8,675.8 50.7 535.1 13,355.2
03/13f 6.7 0.0 949.2 955.9 12,304.7 880.3 1,369.7 15,510.6 1,120.1 3,436.6 10,281.1 53.4 619.5 15,510.6
03/14f 6.7 0.0 1,090.0 1,096.7 14,999.9 929.3 1,553.0 18,578.9 1,290.7 3,968.8 12,520.0 58.2 741.2 18,578.9
03/15f 6.7 0.0 1,258.8 1,265.5 18,342.6 931.9 1,797.9 22,338.0 1,497.5 4,629.2 15,256.3 62.0 892.9 22,338.0
83.1 29.9 23.6 21.8 5.1
83.6 27.9 22.9 21.4 4.7
83.5 26.5 22.2 20.9 4.1
83.2 25.2 21.6 20.5 3.5
Growth ratios (%)
03/12 3.38 1.06 0.06 4.50 2.03 2.47 0.90 0.05 0.07 0.53 0.91
03/13f 3.40 1.05 0.22 4.67 2.12 2.55 0.91 0.05 0.09 0.49 1.00
03/14f 3.38 1.06 0.18 4.62 2.12 2.50 0.83 0.06 0.09 0.51 1.03
03/15f 3.35 1.06 0.16 4.57 2.09 2.48 0.81 0.06 0.08 0.51 1.03
RoA Assets / Equity RoE
0.91 17.18 15.72
1.00 1.03 16.08 16.61 16.15 17.06
1.03 17.32 17.79
Key Ratios
Loans Net interest income Fee income Provision for bad debt Avendus net income Avendus EPS
Operating ratios (%) NII/operating income Fee income/operating income Operating profit margin Net profit margin Effective Tax rate
Balance sheet (INRbn) Fiscal year ending Equity capital Preference capital Reserves and surplus Net worth Deposits Total borrowings Other liabilities and provisions Total liabilities Cash and bank balances Investments Loans Fixed assets Other assets Total assets Business Ratios (%) Loan / Deposit Investment / Deposit SLR Investment / Deposit SLR Investment / NDTL Debenture / Investment
Fiscal year ending Net interest income Fee income Other income Operating income Operating expenses Operating profit Loan loss provisions Provision for investments Other provisions Tax Net profit
Fiscal year ending Valuation ratios (x) P/E (on Avendus EPS) P/BV P/Adjusted BV Dividend yield (%) Per share ratios (INR) Basic Reported EPS (INR) Diluted Reported EPS (INR) Reported Book Value (BV) Adjusted Book Value (ABV) Dividend per share (INR) Return / Profitability Ratios (%) Yield on advances Yield on investments Cost of deposits Net interest margin Fee income/ Op revenue Trading profit/Op revenue Op expense/ Op revenue Capitalization Ratios (%) Equity / Assets Loans / Assets Investments / Assets Dividend payout Internal capital growth Capital adequacy Asset Quality Gross NPL ratio Net NPL ratio Net NPL / networth Loan‐loss reserve / Gross NPL Loan provisions / NII Loan provisions / Total loans Productivity / Efficiency ratios Business per branch (INRmn) Net profit per employee (INRmn)
03/12
03/13f
03/14f
03/15f
11.1 1.6 1.7 2.1
9.0 1.4 1.4 2.2
7.4 1.2 1.2 2.6
6.2 1.0 1.0 3.2
179.3 179.3 1,251.1 1,162.1 41.5
216.1 216.1 1,424.5 1,343.6 42.7
260.9 260.9 1,634.4 1,634.4 51.0
313.2 313.2 1,886.0 1,886.0 61.6
10.0 7.9 5.7 3.5 23.5 45.2 0.9
9.8 7.8 5.7 3.6 22.5 45.4 1.0
9.8 7.6 5.6 3.5 22.8 45.9 1.0
9.8 7.3 5.6 3.5 23.1 45.8 1.0
6.3 65.0 23.4 23.8 13.7 13.9
6.2 66.3 22.2 19.7 13.9 12.9
5.9 67.4 21.4 19.5 14.7 12.3
5.7 68.3 20.7 19.7 15.4 11.8
4.4 1.8 18.8 60.0 26.7 1.3
4.8 1.8 19.0 64.3 26.8 1.3
4.7 1.5 16.6 69.8 24.5 1.1
4.6 1.2 14.8 73.9 24.1 1.1
1,351.5 1,563.9 1,866.8 2,233.7 0.5 0.6 0.7 0.9
Financials
6
India Equity Research
State Bank of India
Financials and valuations (consolidated) Income statement (INRbn) Fiscal year ending Net interest income Fee income Trading profit Other income Total operating income Total operating expense Operating profit Provision for bad debt Other provision PBT (reported) Total taxes PAT (reported) (+) Share in assoc. earnings Less: Minority interest Prior period items Net income (reported) Avendus net income Shares outstanding (mn) Avendus dil. shares (mn) Avendus EPS (INR)
Decomposition of RoA (%) 03/12 578.8 151.0 ‐6.2 153.5 877.1 468.6 408.6 134.7 27.8 246.1 86.4 159.7 0.0 6.3 0.0 153.4 153.4 671 671 228.6
03/13f 666.2 170.9 34.0 159.6 1,030.6 555.1 475.6 156.8 26.1 292.6 102.4 190.2 0.0 4.4 0.0 185.7 185.7 671 671 276.8
03/14f 780.8 204.3 38.5 188.2 1,211.8 667.4 544.4 157.0 29.3 358.1 125.4 232.8 0.0 5.4 0.0 227.4 227.4 671 671 338.9
03/15f 917.5 246.3 44.6 224.9 1,433.2 788.8 644.4 170.9 35.1 438.4 153.4 284.9 0.0 6.4 0.0 278.5 278.5 671 671 415.0
15.6 27.1 ‐3.9 23.9 42.9 35.9
18.6 15.1 13.1 16.5 19.1 21.1
20.9 17.2 19.6 0.1 22.4 22.4
21.0 17.5 20.5 8.9 22.4 22.5
66.0 17.2 46.6 17.5 35.1
64.6 16.6 46.1 18.0 35.0
64.4 16.9 44.9 18.8 35.0
64.0 17.2 45.0 19.4 35.0
03/12 6.7 0.0 1,092.8 1,099.6 14,146.9 1,054.1 1,999.0 18,299.6 1,275.9 4,609.5 11,636.7 70.0 707.5 18,299.6
03/13f 6.7 0.0 1,258.4 1,265.1 16,382.8 800.0 2,675.2 21,123.0 1,354.7 5,106.2 13,804.1 60.1 797.9 21,123.0
03/14f 6.7 0.0 1,461.1 1,467.8 19,815.8 836.4 3,034.0 25,153.9 1,567.2 5,896.4 16,686.4 57.8 946.1 25,153.9
03/15f 6.7 0.0 1,710.9 1,717.6 23,968.2 861.5 3,492.2 30,039.5 1,826.2 6,843.5 20,186.2 54.9 1,128.6 30,039.5
82.3 32.6 25.2 23.5 5.7
84.3 31.2 24.3 23.2 5.7
84.2 29.8 23.5 22.6 5.4
84.2 28.6 22.9 22.1 5.0
Growth ratios (%)
03/12 3.34 0.87 0.84 5.05 2.70 2.35 0.77 0.05 0.11 0.52 0.89
03/13f 3.39 0.87 0.98 5.23 2.82 2.41 0.80 0.05 0.08 0.55 0.94
03/14f 3.39 0.88 0.97 5.24 2.89 2.35 0.68 0.04 0.08 0.57 0.98
03/15f 3.33 0.89 0.97 5.20 2.86 2.33 0.62 0.04 0.08 0.59 1.00
RoA Assets / Equity RoE
0.89 18.33 16.34
0.94 0.98 17.27 17.57 16.16 17.14
1.00 17.99 18.02
Key Ratios
Loans Net interest income Fee income Provision for bad debt Avendus net income Avendus EPS
Operating ratios (%) NII/operating income Fee income/operating income Operating profit margin Net profit margin Effective Tax rate
Balance sheet (INRbn) Fiscal year ending Equity capital Preference capital Reserves and surplus Net worth Deposits Total borrowings Other liabilities and provisions Total liabilities Cash and bank balances Investments Loans Fixed assets Other assets Total assets Business Ratios (%) Loan / Deposit Investment / Deposit SLR Investment / Deposit SLR Investment / NDTL Debenture / Investment
Fiscal year ending Net interest income Fee income Other income Operating income Operating expenses Operating profit Loan loss provisions Provision for investments Other provisions Tax Net profit
Fiscal year ending Valuation ratios (x) P/E (on Avendus EPS) P/BV P/Adjusted BV Dividend yield (%) Per share ratios (INR) Basic Reported EPS (INR) Diluted Reported EPS (INR) Reported Book Value (BV) Adjusted Book Value (ABV) Dividend per share (INR) Return / Profitability Ratios (%) Yield on advances Yield on investments Cost of deposits Net interest margin Fee income/ Op revenue Trading profit/Op revenue Op expense/ Op revenue Capitalization Ratios (%) Equity / Assets Loans / Assets Investments / Assets Dividend payout Internal capital growth Capital adequacy Asset Quality Gross NPL ratio Net NPL ratio Net NPL / networth Loan‐loss reserve / Gross NPL Loan provisions / NII Loan provisions / Total loans Productivity / Efficiency ratios Business per branch (INRmn) Net profit per employee (INRmn)
03/12
03/13f
03/14f
03/15f
8.5 1.2 1.4 2.1
7.0 1.0 1.1 2.5
5.7 0.9 1.0 3.0
4.7 0.8 0.6 3.5
235.0 235.0 1,638.6 1,436.9 39.9
276.8 276.8 1,885.2 1,702.0 47.9
338.9 338.9 2,187.3 2,013.5 58.1
415.0 415.0 2,559.6 3,371.7 68.4
10.3 7.7 6.0 3.5 17.2 (0.7) 53.4
10.1 7.8 6.0 3.5 16.6 3.3 53.9
10.0 7.4 6.0 3.5 16.9 3.2 55.1
10.1 7.0 6.0 3.5 17.2 3.1 55.0
6.0 63.6 25.2 16.8 14.7 12.3
6.0 65.4 24.2 16.9 14.0 11.9
5.8 66.4 23.4 16.8 14.9 11.3
5.7 67.2 22.8 16.1 15.8 10.9
4.4 2.0 21.7 56.5 23.3 1.2
4.5 1.7 19.5 62.7 23.5 1.1
4.4 1.5 17.7 66.6 20.1 0.9
4.3 1.4 17.4 68.0 18.6 0.8
1,374.0 1,583.3 1,884.9 2,245.2 0.6 0.7 0.8 0.9
Financials
7
India Equity Research
State Bank of India
Analyst Certification The following analyst(s) is(are) primarily responsible for this report and, certifies(y) that the opinion(s) on the subject company(ies) and its security(ies) and any other views or forecasts expressed herein accurately reflect their personal view(s). They further certify that no part of their compensation was, is or will be directly or indirectly related to the specific recommendation(s) or views contained in this research report: Chandana Jha
Disclosures Meaning of Avendus Securities Private Limited’s equity research ratings The rating represents the expected change in the price of the stock over a horizon of 12 months. Buy: more than +20%
Add: +10% to +20%
Hold: ‐10% to +10%
Reduce: ‐10% to ‐20%
Sell: less than ‐20%
Proportion of ratings in each category and investment banking relationships (%) At the end of March 2012
Buy
Add
Hold Reduce
Sell
NR
Total
Proportion of ratings in each category
29.1
33.3
17.4
11.6
1.4
7.2
100.0
0.0
8.7
8.3
0.0
0.0
20.0
5.8
Proportion of companies to whom material investment banking services were offered during the previous 12 months
Analyst disclosures None of the analysts involved in the preparation of this research report or a member of his/her household is an officer, director or supervisory board member of any of the company(ies) that is/are the subject of this research report. None of the analysts involved in the preparation of this research report or members of his/her household hold any financial interest in the securities of the company(ies) that is/are the subject of this research report. None of the analysts involved in the preparation of this research report have received or purchased shares of the subject company prior to the public offering of those shares.
Disclosures on potential conflicts of interest for Avendus Securities Private Limited and/or its associate companies (Avendus) as on May 18, 2012 As on the above mentioned date the shareholdings of Avendus does not exceed 5% of the total issued share capital of State Bank of India (SBIN). As on the above mentioned date, the shareholdings of SBIN does not exceed 5% of the total issued share capital of Avendus. Avendus does not hold any other financial interest in SBIN, which is significant in relation to the research recommendation. Avendus is not a market maker or liquidity provider in the securities of the relevant issuer or in any related derivatives. Avendus has not been a lead manager or co‐lead manager of a publicly disclosed offer of securities of SBIN or in any related derivatives over the previous 12 months. Over the previous 12 months, Avendus has not been party to any agreement with SBIN relating to the provision of other investment banking services that do not entail the disclosure of any confidential commercial information. Avendus is not party to any agreement with the subject company(ies) of this research report relating to the production of this research report.
Share price history and rating changes
3,300 SBIN (Initiated on Jul 20, 09)
Rating, Date, TP (INR)
2,850
Buy, 16Feb, 2,577
Buy, 16Aug, 2,845
Buy, 18Apr, 2,577
Buy, 13Feb, 2,577 Buy, 27Mar, 2,577 Buy, 21May, 2,582
2,400 Buy, 11Nov, 2,353
Buy, 06Jan, 2,353
1,950
1,500 May11
Jul11
Aug11
Oct11
Dec11
Feb12
Mar12
May12
Financials
8
India Equity Research
State Bank of India
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OUR OFFICES Avendus Securities Private Limited Mumbai: 6th Floor, B Quadrant, IL&FS Financial Centre, Bandra Kurla Complex, Bandra (E), Mumbai ‐ 400 051 T: +91 22 6648 0050 F: +91 22 6684 2870 Avendus Capital Private Limited Mumbai: 5th Floor, B Quadrant, IL&FS Financial Centre, Bandra Kurla Complex, Bandra (E), Mumbai ‐ 400 051 T: +91 22 6648 0050 F: +91 22 66480040 Bangalore: The Millenia Tower, A ‐ 10th Floor, No 1 & 2 Murphy Road, Ulsoor, Bangalore ‐ 560 008, India
T: +91 80 6648 3600 F: +91 80 6648 3636
New Delhi: Suite 22A/B, The Aman Resort, Lodhi Road, New Delhi ‐ 110 003, India
T: +91 11 4535 7500 F: +91 11 4535 7540
London:
Avendus Capital (U.K.) Private Limited, 33, St James's Square, London, SW1Y 4JS
T: +44 203 159 4353 F: +44 207 661 9400
Avendus Securities Private Limited
SEBI Registration No: BSE CM ‐ INB011292639 | NSE CM‐ INB231294639 | NSE F&O ‐ INF231294639
Financials
9
