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SBI: Merger Pushes up Bad Loans - Views on News from Equitymaster
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SBI: Merger Pushes up Bad Loans
May 23, 2017

State Bank of India (SBI) declared its results for the fourth quarter of the financial year 2016-17 (4QFY17). The net interest income for the quarter grew by 17% YoY and the profit was up by 123% YoY. Here is our analysis of the results.

Performance summary
  • Net interest income (NII) increased by 17% YoY in 4QFY17 on the back of 7.8% YoY growth in advances. In FY17, NII grew by 8.2%.
  • The deposits for the bank grew by 18% YoY led by 24% jump in CASA deposits in the aftermath of the demonetisation drive. The CASA share increased to 45.6% in 4QFY17 as compared to 43.8% in 4QFY16.
  • However, net Interest Margin (NIMs) contracted by 0.12% YoY to 2.8% due to a steeper fall in yield on assets.
  • Non-interest income fell by 2.4% YoY in 4QFY17 due to a 40% fall in miscellaneous income. However, for FY17, non-interest income was up by 27.4% YOY 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% to 43.6% in 4QFY17 mainly on account of a 10% fall in staff expenses after 11,000 employees retired top of scale whereas 13,000 joined in at the entry level pay-scale. For FY17, the cost-to-income ratio has declined by 1% to 48%.
  • Net NPAs (Non-Performing Assets) ratio has fallen from 3.8% in 4QFY16 to 3.7% in 4QFY17 on reduced slippages. The slippage ratio has come down to 2.6% at the end of March 2017 quarter as compared to 4.8% in the year-ago quarter. The provision coverage increased to 66% in 4QFY17 as compared to 61% in the 4QFY16.
  • Backed by lower provisioning, net profit surged by 123% YoY in 4QFY17. But for FY17, the 27% jump in other income has been partially offset by a 22% rise in provisioning translating in a 5.3% rise in net profits.
  • The bank has declared a dividend of Rs 2.60 per share of face value of Rs 1 for FY17. At the current market price, the dividend yield works out to 0.88%.

    Standalone Financials
    Rs (m) 4QFY16 4QFY17 Change FY16 FY17 Change
    Interest income 429,420 473,930 10.4% 1,639,980 1,755,180 7.0%
    Interest expense 275,410 293,220 6.5% 1,068,030 1,136,590 6.4%
    Net Interest Income 154,010 180,710 17.3% 571,950 618,590 8.2%
    Net interest margin (%) 2.96% 2.84%   2.96% 2.84%  
    Other Income 105,850 103,270 -2.4% 278,450 354,610 27.4%
    Other Expense 117,940 123,720 4.9% 417,820 464,730 11.2%
    Provisions and contingencies 131,740 117,400 -10.9% 294,840 359,930 22.1%
    Profit before tax 10,180 42,860 321.0% 137,740 148,540 7.8%
    Tax -2,460 14,720   38,230 43,710 14.3%
    Profit after tax/ (loss) 12,640 28,140 122.6% 99,510 104,830 5.3%
    Net profit margin (%) 2.9% 5.9%   6.1% 6.0%  
    No. of shares (m)         7,973.5  
    Book value per share (Rs)*         191.0  
    P/BV (x)         1.51  

    * (Book value as on 31stMarch 2017)

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  2. Equitymaster has financial interest in SBI.
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