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SBI: Big Treasury Income May Fail To Compensate For NPA Provisions - Views on News from Equitymaster
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  • Nov 21, 2016 - SBI: Big Treasury Income May Fail To Compensate For NPA Provisions

SBI: Big Treasury Income May Fail To Compensate For NPA Provisions
Nov 21, 2016

State Bank of India (SBI) declared its results for the second quarter of the financial year 2015-16 (2QFY17). The net interest income for the quarter grew by 1.3% YoY and the profit was down by 34.5% YoY. Here is our analysis of the results.

Performance summary
  • Net interest income (NII) increased by a mere 1.3% YoY in 2QFY17 on an 8% YoY growth in advances. In a sign of improving asset quality, the share of retail loans in the overall loan book has risen to 24% in 2QFY17 as compared to 21% in 2QFY16. In 1HFY17, NII grew by 2.7%.
  • The deposits for the bank grew by 13.8% YoY led by growth in CASA and term deposits. Each of the savings bank and current bank accounts increased by 16% YoY and 13% YoY, respectively during the quarter. The CASA ratio increased to 42.7% in 2QFY17 as compared to 42.2% in 2QFY16.
  • Non-interest income increased by 36% YoY and 40% YoY, respectively in 2QFY17 and 1HFY17backed by higher fee income, forex income coupled with a steep rise in profit earned from sale of investments.
  • NIMs (net interest margins) contracted by 0.21% to 2.8%.
  • The cost-to-income ratio increased by 1.1% to 50.9% in 2QFY17. For 1HFY17, the cost-to-income ratio has marginally declined below 50%.
  • Net NPAs (Non Performing Assets) ratio has increased from 2% in 2QFY16 to 4.2% in 2QFY17 on increased slippages. But on a positive note, sequentially the slippage ratio has come down to 2.3% from 2.7% in the preceding quarter. The provision coverage declined to 62% in 2QFY17 as compared to 70.5% in the year-ago quarter.
  • Net profit fell by 34.5% YoY in 2QFY17 due to 81% jump in provisioning during the quarter. For 1HFY17, the net profit was down by 33.2% YoY.

    Standalone Financials
    Rs (m) 2QFY16 2QFY17 Change 1HFY16 1HFY17 Change
    Interest income 406,580 423,190 4.1% 803,000 839,120 4.5%
    Interest expense 264,050 278,810 5.6% 523,160 551,630 5.4%
    Net Interest Income 142,530 144,380 1.3% 279,840 287,490 2.7%
    Net interest margin (%) 3.01% 2.80%
    Other Income 61,970 84,240 35.9% 112,850 157,590 39.6%
    Other Expense 101,840 116,370 14.3% 198,020 222,310 12.3%
    Provisions and contingencies 43,610 78,970 81.1% 83,600 153,100 83.1%
    Profit before tax 59,050 33,280 -43.6% 111,070 69,670 -37.3%
    Tax 20,260 7,890 -61.1% 35,360 19,090 -46.0%
    Profit after tax/ (loss) 38,790 25,390 -34.5% 75,710 50,580 -33.2%
    Net profit margin (%) 9.5% 6.0% 9.4% 6.0%
    No. of shares (m) 7762.8
    Book value per share (Rs)* 183.9
    P/BV (x) 1.52
    * (Book value as on 30th September 2016)
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