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SBI: Stake Sale Gains Boost Earnings - Views on News from Equitymaster
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SBI: Stake Sale Gains Boost Earnings
Feb 28, 2017

State Bank of India (SBI) declared its results for the third quarter of the financial year 2015-16 (3QFY17). The net interest income for the quarter grew by 8% YoY and the profit was up by 134% YoY. Here is our analysis of the results.

Performance summary
  • Net interest income (NII) increased by 8% YoY in 3QFY17 on an 4.8% YoY growth in advances. In 9mFY17, NII grew by 4.8%.
  • The deposits for the bank grew by 22% YoY led by growth in CASA deposits in the aftermath of the demonetisation drive. Each of the savings bank and current bank accounts increased by 28.5% YoY and 36% YoY, respectively during the quarter. The CASA share increased to 46.5% in 3QFY17 as compared to 42.7% in 3QFY16.
  • However, Net Interest Margin (NIMs) contracted by 0.15% YoY to 2.78% due to a steeper fall in yield on assets.
  • Non-interest income increased by 59% YoY and 46% YoY, respectively in 3QFY17 and 9mFY17 backed by gain of Rs 17.6 billion on sale of 3.9% stake in the subsidiary SBI Life Insurance Company Ltd.
  • The cost-to-income ratio declined by 2.9% to 48.6% in 3QFY17. For 9mFY17, the cost-to-income ratio has marginally declined below 50%.
  • Net NPAs (Non-Performing Assets) ratio has increased from 2.9% in 3QFY17 to 4.2% in 3QFY17 on increased slippages. But on a positive note, the slippage ratio has come down to 2.6% at the end of December 2016 quarter as compared to 3.4% in the year-ago quarter. The provision coverage declined to 63% in 3QFY17 as compared to 65% in the 3QFY16.
  • Backed by steep rise in other income and modest 12.5% increase in provisioning, net profit surged by 134% YoY in 3QFY17. But for 9mFY17, a 48.7% jump in provisioning eroded net profit by 11.7% YoY.

    Standalone Financials
    Rs (m) 3QFY16 3QFY17 Change 9mFY16 9mFY17 Change
    Interest income 406,440 439,256 8.1% 1,210,570 1,281,260 5.8%
    Interest expense 269,470 291,741 8.3% 792,630 843,370 6.4%
    Net Interest Income 136,970 147,515 7.7% 417,940 437,890 4.8%
    Net interest margin (%) 2.93% 2.78% 2.93% 2.78%
    Other Income 60,870 96,619 58.7% 172,600 251,330 45.6%
    Other Expense 101,860 118,702 16.5% 299,880 341,010 13.7%
    Provisions and contingencies 79,500 89,428 12.5% 163,100 242,520 48.7%
    Profit before tax 16,480 36,004 118.5% 127,560 105,690 -17.1%
    Tax 5,330 9,904 85.8% 40,690 29,000 -28.7%
    Profit after tax/ (loss) 11,150 26,100 134.1% 86,870 76,690 -11.7%
    Net profit margin (%) 2.7% 5.9% 7.2% 6.0%
    No. of shares (m) 7,762.8
    Book value per share (Rs)* 183.9
    P/BV (x) 1.47

    * (Book value as on 31st December 2016)

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