State Bank of India's standalone net profit at Rs838.40cr in Q4FY19, vs net loss of Rs7,718cr yoy : Misses Estimates

The bank’s standalone NII stood at Rs22,954cr, up 14.92% yoy

May 15, 2019 05:05 IST India Infoline Research Team

State Bank of India Q4FY19

Standalone Results Q4FY19: ( cr)

Q4FY19 YoY (%)
NII 22,954 14.9
GNPA (%) 7.5 -118
Provisions 17,336 [28.0]
Net Profit (adjusted) 838.40 -
***GNPA change is on qoq basis
SBI's Q4FY19 NII came at Rs22,954cr as against Rs19,974cr, which is up by 14.9% yoy. The bank has reported a net profit of Rs838.4cr in Q4FY19, which is below consensus estimates, as against loss of Rs7,718cr yoy. Its GNPA for Q4FY19 came at 7.53% against 8.71% qoq, which has decreased by 118bps. NNPA for the quarter came at 3.01% against 3.95% qoq, which has declined by 94bps.
  • Loan growth was driven by the corporate and retail segments, while the international book was stable yoy.
  • Domestic loans grew 14% yoy, driven by corporate loans (+15% YoY) and retail loans (+19% yoy) on a gross basis. SME growth slowed to 7% yoy, while agriculture loan growth picked-up to 8% yoy. International loans were flat YoY after 3 quarters of decline.
  • NIM expansion of 25bps yoy aided NII growth. Core fee income growth of 3% yoy (standalone) suffers from a base effect. Cost/income ratio improved sequentially due to absence of gratuity and pension provisions. Slippages, adjusted for Jet Airways (Rs1,220cr), were nearly in line with 3QFY19. GNPA ratio declined, while PCR improved.
  • Margin expansion, along with improving loan growth, led to 15% yoy NII growth
  • Core fee income growth was muted at 3% yoy, while trading gains were sharply lower in 4QFY19 vs. 4QFY18.
  • The bank has reported operating profit for Rs16,933cr for the quarter as against Rs15,883cr.
  • The PCR for the quarter came at 78.7%.
  • Gross slippages for the quarter came at Rs7,691cr.
  • On a standalone basis, slippages in 4QFY19 stood at Rs7960cr (1.6% of opening loans) as against Rs6540cr in 3QFY19. Corporate slippages accounted for Rs2280cr (including Jet Airways Rs1220cr).
  • No disclosure was required with regards to the Divergence Report for FY18, since the divergence was within the RBI specified thresholds.
Key takeaways from the analyst meet
  • Corporate loan growth will remain strong, driven by focus on highly rated corporates.
  • SBIN will also continue to do project finance; however, project finance ticket sizes have been coming-off incrementally.
  • Current pipeline in project finance is ~Rs25,000cr.
  • Retail loans: Home loans have a very low stress level; LTV is ~57% and ATS is Rs2.9mn up from Rs2.6mn in FY18. Auto loans have witnessed a slowdown on account of underlying sales as well as the fact the SBIN is not being aggressive in this portfolio.
  • In FY19, SBIN had portfolio buyouts of ~Rs19,000cr from NBFCs and would continue to buyout quality portfolios going forward
  • SBIN had linked SA rates for balances above Rs0.1mn to repo rates effective May-2019. Management stated that this would continue for the foreseeable future; however, it could decide to alter spreads, depending on the inflows received.
  • Operating expenses in FY20 would have a benefit of ~Rs4,000cr versus FY19, due to lower provisions for gratuity (Rs2,100cr) and lower pension provisions (Rs19bn).
  • Two subsidiaries – SBI Cards and SBI General Insurance – are likely to be listed in FY20.
  • While the current level of capital is adequate, SBIN could look to raise Tier 1 capital in the next twelve months under favourable conditions.
  • One-time gains in FY20 could be: i) recovery of ~Rs16,000cr which depends on resolutions of three NCLT 1 accounts – Essar Steel, Bhushan Power & Steel, and Alok Industries and ii) stake sale in SBI Cards/SBI General Insurance through their listing.

Technical View:

State Bank of India is currently trading at Rs. 301.10, up by 1.85 points or 0.62% from its previous closing of Rs. 299.25 on the BSE.
The scrip opened at Rs. 301.95 and has touched a high and low of Rs. 302.80 and Rs. 292.20 respectively. So far 2,75,05,431 (NSE+BSE) shares were traded on the counter. The stock is currently trading below its 50 DMA.

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