X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2018 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
SBI: Turnaround in Profits on Insurance Stake Sale - Views on News from Equitymaster
StockSelect
  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  
  • Home
  • Outlook Arena
  • Nov 16, 2017 - SBI: Turnaround in Profits on Insurance Stake Sale

SBI: Turnaround in Profits on Insurance Stake Sale
Nov 16, 2017

State Bank of India (SBI) declared its results for the second quarter of the financial year 2017-18 (2QFY18). The net interest income for the quarter increased by 2.6% YoY and gain from stake sale resulted in a huge turnaround in profit. Here is our analysis of the results.

Performance summary
  • Interest Income grew by a mere 0.1% YoY in 2QFY18 on a subdued 0.9% YoY growth in advances. However, lower interest outgo on deposits led to a 2.6% YoY rise in Net interest income (NII) during the quarter.
  • The deposits for the bank grew by 10.3% YoY led by 21% jump in CASA. The CASA share increased to 44.9% in 2QFY18 as compared to 40.9% in 2QFY17.
  • The Net Interest Margin (NIMs) contracted by 0.36% YoY to 2.43% in 2QFY18 due to a faster fall in yield on advances.
  • Non-interest income surged by 57.9% YoY in 2QFY18 backed by proceeds of Rs 54.4 billion from stake sale in SBI Life Insurance. For 1HFY18, other income was up by 27% YoY.
  • On account of lower contribution for employees, operating expenses were reined in during the quarter. The cost-to-income ratio reduced to 42% in 2QFY18 from over 50% in the year-ago quarter. Excluding the impact of exceptional income, the cost-to-income ratio for 1HFY18 hovered above 51%.
  • The bank's asset quality has marginally improved during the quarter due to reduction in bad loans in the personal and SME loan segments. Resultantly, gross bad loans ratio declined to 9.8% in 2QFY18 from a peak of 9.9% in the 1QFY18.
  • The bank has utilised the windfall gain to provide for bad loans during the quarter. Therefore, provisions increased by 29% YoY in 2QFY18. For 1HFY18, provisions were up 0.7% YOY. The bank's provision coverage ratio improved to 65% at the end September 2017 quarter from 58.5% at the end of September 2016 quarter.
  • Backed by higher other income from stake sale in insurance subsidiary and write-back of tax provisions, the company has turned in the black and reported a profit of Rs 15.8 billion in 2QFY18. SBI's profit stood at Rs 35.9 billion in 1HFY18 as compared to a loss of Rs 1.8 billion in the year-ago period.
  • The bank remains well capitalized with the capital adequacy ratio and Tier I capital ratio standing at 13.6% and 10.9%, respectively.

    Standalone Financials after Merger
    Rs (m) 2QFY17 2QFY18 Change 1HFY17 1HFY18 Change
    Interest income 548,200 548,500 0.1% 1,093,140 1,097,550 0.4%
    Interest expense 367,010 362,640 -1.2% 729,490 735,630 0.8%
    Net Interest Income 181,190 185,860 2.6% 363,650 361,920 -0.5%
    Net interest margin (%) 2.79% 2.43%   2.96% 2.84%  
    Other Income 101,460 160,160 57.9% 189,080 240,220 27.0%
    Other Expense 142,770 146,030 2.3% 275,220 283,400 3.0%
    Provisions and contingencies 148,300 191,380 29.0% 278,660 280,670 0.7%
    Profit before tax -8,420 8,610   -1,150 38,070  
    Tax -2,840 -7,200 153.5% 680 2,190 222.1%
    Profit after tax/ (loss) -5,580 15,810   -1,830 35,880 -2060.7%
    Net profit margin (%) -1.0% 2.9%   -0.2% 3.3%  
    No. of shares (m)         8630.0  
    Book value per share (Rs)*         268.0  
    P/BV (x)         1.21  

    * (Book value as on 30th Sep 2017)

To Read the Full Story, Subscribe or Sign In



DISCLOSURES UNDER SEBI (RESEARCH ANALYSTS) REGULATIONS, 2014
INTRODUCTION:
Equitymaster Agora Research Private Limited (hereinafter referred to as "Equitymaster"/"Company") was incorporated on October 25, 2007. Equitymaster is a joint venture between Quantum Information Services Private Limited (QIS) and Agora group. Equitymaster is a SEBI registered Research Analyst under the SEBI (Research Analysts) Regulations, 2014 with registration number INH000000537.

BUSINESS ACTIVITY:
An independent research initiative, Equitymaster is committed to providing honest and unbiased views, opinions and recommendations on various investment opportunities across asset classes.

DISCIPLINARY HISTORY:
There are no outstanding litigations against the Company, it subsidiaries and its Directors.

GENERAL TERMS AND CONDITIONS FOR RESEARCH REPORT:
For the terms and conditions for research reports click here.

DETAILS OF ASSOCIATES:
Details of Associates are available here.

DISCLOSURE WITH REGARDS TO OWNERSHIP AND MATERIAL CONFLICTS OF INTEREST:
  1. 'subject company' is a company on which a buy/sell/hold view or target price is given/changed in this Research Report.
  2. Equitymaster has financial interest in State Bank Of India.
  3. Equitymaster's investment in the subject company is as per the guidelines prescribed by the Board of Directors of the Company. The investment is however made solely for building track record of its services.
  4. Equitymaster's Associates and Research Analyst or his/her relative doesn't have any financial interest in the subject company.
  5. Neither Equitymaster, it's Associates, Research Analyst or his/her relative have actual/beneficial ownership of one percent or more securities of the subject company at the end of the month immediately preceding the date of publication of the research report.
  6. Neither Equitymaster, it's Associates, Research Analyst or his/her relative have any other material conflict of interest at the time of publication of the research report.
  7. Equitymaster's technical team/other research services have given a 'Buy' view on State Bank Of India.
DISCLOSURE WITH REGARDS TO RECEIPT OF COMPENSATION:
  1. Neither Equitymaster nor it's Associates have received any compensation from the subject company in the past twelve months.
  2. Neither Equitymaster nor it's Associates have managed or co-managed public offering of securities for the subject company in the past twelve months.
  3. Neither Equitymaster nor it's Associates have received any compensation for investment banking or merchant banking or brokerage services from the subject company in the past twelve months.
  4. Neither Equitymaster nor it's Associates have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past twelve months.
  5. Neither Equitymaster nor it's Associates have received any compensation or other benefits from the subject company or third party in connection with the research report.
GENERAL DISCLOSURES:
  1. The Research Analyst has not served as an officer, director or employee of the subject company.
  2. Equitymaster or the Research Analyst has not been engaged in market making activity for the subject company.
Definitions of Terms Used:
  1. Buy recommendation: This means that the subscriber could consider buying the concerned stock at current market price keeping in mind the tenure and objective of the recommendation service.
  2. Hold recommendation: This means that the subscriber could consider holding on to the shares of the company until further update and not buy more of the stock at current market price.
  3. Buy at lower price: This means that the subscriber should wait for some correction in the market price so that the stock can be bought at more attractive valuations keeping in mind the tenure and the objective of the service.
  4. Sell recommendation: This means that the subscriber could consider selling the stock at current market price keeping in mind the objective of the recommendation service.
Feedback:
If you have any feedback or query or wish to report a matter, please do not hesitate to write to us.

Small Investments
BIG Returns

Zero To Millions Guide 2018
Get our special report, Zero To Millions
(2018 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

SBI SHARE PRICE


Dec 14, 2017 (Close)

TRACK SBI

COMPARE SBI WITH

MARKET STATS