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SBI: FY16 Earnings Hit by Bad Loan Provisions - Views on News from Equitymaster
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SBI: FY16 Earnings Hit by Bad Loan Provisions
May 31, 2016

State Bank of India (SBI) declared its results for the fourth quarter of the financial year 2015-16 (4QFY16). The net interest income for the quarter increased by 3.9% YoY and the profit was down by 66% YoY. Here is our analysis of the results.

Performance summary
  • Net interest income (NII) increased by 3.9% YoY in 4QFY16 on a 12.6% YoY growth in advances. For FY16, NII increased by 3.4% YoY.
  • But NIMs (net interest margins) contracted by 0.2% to 2.96% in FY16 on account of relatively slower fall in cost of deposits as compared to yield on advances.
  • Non-interest income increased by 25.6% YoY and 24.7% YoY in 4QFY16 and FY16, respectively backed by recovery in written-off accounts.
  • The bank has managed to keep operating expenses under leash aided by 4.9% and 0.96% decline in wages for 4QFY16 and FY16, respectively.
  • Net NPAs (Non Performing Assets) ratio has increased from 4.3% in 4QFY15 to 6.5% in 4QFY15 on increased classification of bad loans to comply with Asset Quality Review norms of RBI.
  • Net profit fell by 66.2% YoY in 4QFY16 due to a 2.4 folds jump in provisioning during the quarter. For FY16, net profit was down by 24% YoY.
  • Capital adequacy ratio stood at 13.1% at the end of 4QFY16 as per Basel III norms.

    Standalone Financial
    Rs (m) 4QFY15 4QFY16 Change FY15 FY16 Change
    Interest income 401,012 428,314 6.8% 1,523,971 1,636,853 7.4%
    Interest expense 253,894 275,406 8.5% 973,818 1,068,035 9.7%
    Net Interest Income 147,118 152,908 3.9% 550,153 568,818 3.4%
    Net interest margin (%) 3.16% 2.96%
    Other Income 85,153 106,956 25.6% 225,759 281,584 24.7%
    Other Expense 104,673 117,945 12.7% 380,539 417,824 9.8%
    Provisions and contingencies 69,433 131,741 89.7% 202,233 294,838 45.8%
    Profit before tax 58,164 10,179 -82.5% 193,140 137,741 -28.7%
    Tax 20,744 -2,460 -111.9% 62,124 38,234 -38.5%
    Profit after tax/ (loss) 37,420 12,638 -66.2% 131,016 99,507 -24.0%
    Net profit margin (%) 9.3% 3.0% 8.6% 6.1%
    No. of shares (m) 7762.8
    Book value per share (Rs)* 176.6
    P/BV (x) 1.12

    *(Book value as on 31st March 2016)

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