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SBI: Pushed in Red on Increased Slippages and Higher Credit Costs - Views on News from Equitymaster

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  • Feb 21, 2018 - SBI: Pushed in Red on Increased Slippages and Higher Credit Costs

SBI: Pushed in Red on Increased Slippages and Higher Credit Costs
Feb 21, 2018

State Bank of India (SBI) declared its results for the third quarter of the financial year 2017-18 (3QFY18). The net interest income for the quarter increased by 5.2% YoY with the company slipping in a loss due to higher loan loss provisioning. Here is our analysis of the results.

Performance summary
  • Interest Income declined by 1.6% YoY in 3QFY18 on a steep fall in yields and subdued 2.5% YoY growth in advances. However, steeper fall in interest outgo led to a 5.2% YoY rise in Net interest income (NII) during the quarter. For 9mFY18, Net interest income was up by 1.4% YoY.
  • The deposits for the bank grew by 1.9% YoY. The CASA share remained stable at 45% during the quarter.
  • The Net Interest Margin (NIMs) contracted by 0.26% YoY to 2.45% in 3QFY18 due to a faster fall in yield on advances.
  • Non-interest income was down by 29.7% YoY due to lower trading income arising from hardening in the bond yields as well as reduced forex earnings. For 9mFY18, other income was up by 5.6% YoY.
  • Due to lower staff expenses, operating expenses were reined in during the quarter. The cost-to-income ratio reduced to 50.8% in 3QFY18 from over 56% in the year-ago quarter. The cost-to-income ratio for 9mFY18 fell below 50%.
  • The asset quality deteriorated further due to slippages in the corporate loan segment. The gross bad loans ratio rose to 10.4% in the December 2017 quarter as compared to 9.8% in the preceding quarter and 8.7% in the year-ago quarter. Thus, the bad loan provisioning increased by a steep 83.8% YoY during the quarter.
  • Resultantly, the bank has widened loss to Rs 24.2 billion from Rs 1.3 billion in the year-ago quarter. For 9mFY18, the net profit was down by 28.5% YoY.
  • The bank remains well capitalized with the capital adequacy ratio and Tier I capital ratio standing at 13.7% and 10.7%, respectively as on 31st December 2017.

    Standalone Financials after Merger
    Rs (m) 3QFY17 3QFY18 Change 9mFY17 9mFY18 Change
    Interest income 557,000 548,030 -1.6% 1,650,140 1,645,580 -0.3%
    Interest expense 379,310 361,150 -4.8% 1,108,800 1,096,790 -1.1%
    Net Interest Income 177,690 186,880 5.2% 541,340 548,790 1.4%
    Net interest margin (%) 2.71% 2.45%        
    Other Income 115,070 80,840 -29.7% 304,150 321,060 5.6%
    Other Expense 148,750 150,170 1.0% 423,970 433,580 2.3%
    Provisions and contingencies 119,230 188,760 58.3% 397,890 469,430 18.0%
    Exceptional/one-time item 19,530          
    Profit before tax 5,250 -71,210   23,630 -33,160  
    Tax 6,580 -47,050 -815.0% 7,260 -44,860 -717.9%
    Profit after tax/ (loss) -1,330 -24,160   16,370 11,700 -28.5%
    Net profit margin (%) -0.2% -4.4%   1.0% 0.7%  
    No. of shares (m)         8630.0  
    Book value per share (Rs)*         268.0  
    P/BV (x)         1.00  

    * (Book value as on 31st Dec 2017)

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