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SBI: Sequential fall in slippages brings respite amid falling earnings - Views on News from Equitymaster
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  • Aug 12, 2016 - SBI: Sequential fall in slippages brings respite amid falling earnings

SBI: Sequential fall in slippages brings respite amid falling earnings
Aug 12, 2016 | Updated on Aug 19, 2016

State Bank of India (SBI) declared its results for the first quarter of the financial year 2015-16 (1QFY17). The net interest income for the quarter grew by 4.2% YoY and the profit was down by 31.7% YoY. Here is our analysis of the results.

Performance summary
  • Net interest income (NII) increased by 4.2% YoY in 1QFY17 on a 11.4% YoY growth in advances. In a sign of improving asset quality, the share of retail loans in the overall loan book has risen to 23% in 1QFY17 as compared to 21% in 1QFY16.
  • The deposits for the bank grew by 10.5% YoY led by growth in CASA and term deposits. Each of the savings bank and current bank accounts increased by 14% YoY and 13% YoY, respectively during the quarter. The CASA ratio increased to 42.8% in 1QFY17 as compared to 41.7% in 1QFY16.
  • Non-interest income increased by 44% YoY backed by a steep rise in profit earned from sale of investments and recovery in written-off assets.
  • NIMs (net interest margins) contracted by 0.16% to 2.83% due to transmission of 90 basis points cut in the Marginal Cost of Lending rate and increase in bad loans by Rs 450 billion during the quarter.
  • Aided by reduction in employee contributions, the bank has been able to rein in operating expenses as compared to growth in income. The cost-to-income ratio fell to 48.9% in 1QFY17 from 51.1% in 1QFY16.
  • Net NPAs (Non Performing Assets) ratio has increased from 2.2% in 1QFY16 to 4.1% in 1QFY17 on increased slippages. But on a positive note, sequentially the slippages have come down substantially to Rs 87.9 billion in 1QFY17 from Rs 303 billion in the preceding quarter. The provision coverage declined to 61.6% in 1QFY17 as compared to 69.5% in the year-ago quarter.
  • Net profit fell by 31.7% YoY due to an 85% jump in provisioning during the quarter.

    Standalone Financials
    Rs (m) 1QFY16 1QFY17 Change
    Interest income 396,430 415,940 4.9%
    Interest expense 259,110 272,810 5.3%
    Net Interest Income 137,320 143,130 4.2%
    Net interest margin (%) 2.99% 2.83%
    Other Income 50,880 73,350 44.2%
    Other Expense 96,180 105,940 10.1%
    Provisions and contingencies 40,000 74,130 85.3%
    Profit before tax 52,020 36,410 -30.0%
    Tax 15,100 11,200 -25.8%
    Profit after tax/ (loss) 36,920 25,210 -31.7%
    Net profit margin (%) 9.3% 6.1%
    No. of shares (m) 7762.8
    Book value per share (Rs)* 180.2
    P/BV (x) 1.42

    * (Book value as on 30th June 2016)

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