State bank of India Q1FY19 revenue improved by 4.1% yoy to Rs65,492.7cr. Its NII for the quarter came in at Rs21,798.4cr as against Rs17,606cr last year, up 23.8% yoy. The bank, however, has reported a net loss of Rs4,875.9cr for the quarter against a profit of Rs2,005.5cr reported in the corresponding quarter of the last fiscal. The loss is due to higher provisions on NPA and MTM bond losses during the quarter. Its GNPA for the quarter stood at 10.69% as against 10.91% qoq, a decrease of 22bps. NNPA for the quarter came in at 5.29% against 5.73% qoq, a decrease of 44bps.
NII growth was strong in 1QFY19 despite muted loan growth, boosted by write-back on NCLT accounts. Other income declined yoy due to a sharp drop in trading income, while core fee income growth remained sluggish.
During the quarter, the bank received a tax credit of Rs2,379cr as against Rs4,495cr qoq.
During the quarter there was MTM provisions on the investment portfolio of Rs5,890cr, also there was recovery of two steel accounts in NCLT list 1.
Slippage ratio moderated to 3.2% of opening loans from 6.9% in 4QFY18. While corporate slippage ratio declined to 3.4% in 1QFY19 (11.6% in 4QFY18), non-corporate slippage ratio increased to 2.7% in 1QFY19 (1.6% in 4QFY18).
Stressed assets (like-to-like) reduced on account of increased recoveries from NCLT accounts, while recoveries outside NCLT were marginal.
Domestic advances registered a growth of 7.21% for the quarter to Rs17.23 lakh cr from Rs16.07 lakh cr yoy. Gross advances at the SBI group-level registered a growth of 5.49% to Rs19.9 lakh cr in Q1FY19 from Rs18.86 lakh cry yoy.
Loan growth was muted primarily on account of the large corporate, mid corporate and SME segments (cumulative 5% yoy growth on a gross basis) along with a decline in the international loan book driven mainly by a run-down in buyers’ credit. Retail loans grew moderately, at 14% yoy.
Retail advances increased yoy to Rs5.59 lakh cr. Home loans improved 13.01% to Rs.3.2 lakh cr.
Advances to large, mid-corporates, and SME together increased 5.14% from Rs9.28 lakh cr as of June 2017 to Rs9.76 lakh cr as on June 2018.
Agri advances dipped 0.52% yoy from Rs1.89 lakh cr as of June 2017 to Rs1.88 lakh cr as of June 2018.
International advances declined 4.43% yoy from Rs2.79cr as on June 2017 to Rs2.67 lakh cr as on June 2018.
Deposits of the bank increased 5.58% from Rs26 lakh cr as on June 2017 to Rs27.5 lakh cr as on June 2018.
CASA Ratio improved 69bps from 44.38% as of June 2017 to 45.07% as of June 2018, whereas the daily average CASA improved 103bps to 44.84%.
Provision Coverage Ratio improved 846bps yoy from 60.79% as of June 2017 to 69.25% as of June 2018 and improved 308bps sequentially.
Provisions for the quarter improved 115% yoy to Rs19,228cr.
Provision Coverage Ratio on NCLT List 1 and List 2 are at 65% and 79% respectively, whereas the same on both NCLT lists is 71%.
The management has stated that they had loan exposure towards Jet Airways.
Watchlist as of Q1FY19 end stood at Rs24,633cr as against Rs28,989cr qoq.
Overall CAR remained at 12.83% for the quarter.
Net Interest Margin (domestic) increased 45bps yoy from 2.5% as of June 2017 to 2.95% as of June 2018. Margins expanded 38bps yoy (14bps ex-interest recovery) as yield on loans increased 43bps yoy, while cost of funds decreased 49bps yoy. Management expects NIM to trend higher due to further resolutions.
Key takeaways from the analyst meet
International loans declined 4% yoy on account of reduction in buyers’ credit of Rs45,000cr and Rs10,000cr of loans being transferred to a subsidiary in UK.
Interest reversal in 1QFY19 stood at Rs1,200cr (Rs2,800cr in 1QFY18).
Management stated that there could be IPOs of up to 3 subsidiaries in FY19/20E. The board has approved a stake sale of up to 4% in SBI General Insurance as a pre-cursor to its listing. SBI Cards and SBI Funds Management are the other subsidiaries likely to be listed.
Management reiterated the following guidance for FY19E, loan growth >10%, credit cost of 2%, slippage ratio of 2%, ROA of 0.9-1.0% by FY20E.
SBI has a high PCR on NCLT cases (71%). Management expects ~Rs4,000cr of provision write-back upon resolution of an NCLT-1 account in 2Q/3QFY19E.
The bank expects to resolve the remaining NCLT-1 exposure (Rs34,600cr – fund based) by 2QFY19E.
Non-fund based exposure to GNPLs stood at ~7.7% of corporate and SME GNPLs i.e. ~Rs13,500cr.
Additions to existing GNPLs of Rs4,370cr included one account of ~Rs2,000cr (devolvement of non-fund based limits).
Management expects an average recovery of ~50% in the power sector. SBI has a PCR of 40.5% on existing power sector GNPLs and stressed assets. The bank will require a further provision of ~Rs4,000cr on these accounts going forward.
State Bank of India is currently trading at Rs304.40, down Rs12.05, or 3.81%, from its previous close of Rs316.45 on the BSE.
The scrip opened at Rs317.70 and has touched a high and low of Rs325.85 and Rs301.60, respectively. So far, 11,10,51,570 (NSE+BSE) shares have been traded on the counter. The stock is currently trading below its 200 DMA.
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