Tag: earnings

Analysts bullish on SBI counter after strong Q2 earnings performance, BFSI News, ET BFSI

Banking & Finance

[ad_1]

Read More/Less


MUMBAI: Analysts are showering price target upgrades on the counter of State Bank of India after the state-owned lender’s strong earnings performance for the quarter ended September.

Analysts have raised their price target on the stock by 5-23 per cent following the results announcement on November 3, while most of them also retained their “buy” calls on the scrip.

“SBI is still trading at temptingly low valuations and remains well positioned as a recovery play,” said brokerage firm Edelweiss Securities in a note.

SBI reported better-than-expected net profit, net interest income and asset quality for the reported quarter. The lender’s gross non-performing assets ratio eased to 4.9 per cent from 5.32 per cent in the previous quarter.

Incremental stress on the loan book also declined as slippages in SMA-1 and SMA-2 category shrank 40 per cent sequentially to Rs. 6,690 crore reflecting the improving health of the balance sheet. Analysts said that the lender is exiting the second wave of the pandemic with a stronger balance sheet that has set the stage for growth in the coming years.

Shares of SBI have risen 143 per cent over the past 12 months making it one of the best performing banking stocks on the Street. Much of those gains are on the assumption that lender will be a major beneficiary of the improvement in private capital expenditure going ahead and its own improving asset quality.

“From here on, loan growth will be the key driver of PPOP growth. We remain optimistic on the long term drivers driving profitability,” said brokerage firm Nomura India in a note.

While brokerage firm Edelweiss Securities suggested that SBI has set itself up for more rerating in valuation multiples with its Q2 earnings, much of that rerating will depend on how expectations on loan growth turn out.

For the reported quarter, the lender reported little over 6 per cent year-on-year growth in loans with retail and home loans providing for much of the growth. At the same time, the corporate loan book shrank nearly 4 per cent indicating that the corporate capex cycle was still some way away.

“We see risk-on gaining momentum and potential dwindling of social costs. A discount to private peers is nevertheless warranted on account of lower credit cost elasticity (low provisioning) and structural limitations,” said Edelweiss Securities.



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , ,

BoM tops PSU banks in terms of loan, saving deposit growth in Q1, BFSI News, ET BFSI

Banking & Finance

[ad_1]

Read More/Less


New Delhi: State-owned Bank of Maharashtra (BoM) has emerged as the top performer among public sector lenders in terms of loan and savings deposit growth during the first quarter of the current financial year. The Pune-headquartered lender recorded 14.46 per cent increase in gross advances at Rs 1,10,592 lakh crore in April-June period of 2021-22, as per the published data of BoM.

It was followed by Punjab & Sind Bank which posted 10.13 per cent growth in advances with aggregate loans at Rs 67,933 crore at the end of June 2021.

When it came to deposit mobilisation, BoM with nearly 14 per cent growth was a notch behind Punjab and Sind Bank, while the country’s largest lender State Bank of India recorded 8.82 per cent rise.

However, in absolute terms SBI’s deposit base was 21 times higher at Rs 37.20 lakh crore as against Rs 1.74 lakh crore of BoM.

Current Account Savings Account (CASA) for BoM saw 22 per cent rise, the highest among the public sector lenders, during the quarter.

As a result, CASA was 53 per cent or Rs 92,491 crore of the total liability of the bank.

Total business of BoM increased 14.17 per cent to Rs 2.85 lakh crore at the end of June 2021.

For the first quarter, BoM’s standalone net profit more than doubled to Rs 208 crore as against Rs 101 crore in the same period a year ago.

The bank’s asset quality improved significantly as the gross bad loans or gross non-performing assets (NPAs) dipped to 6.35 per cent of gross advances by the end of June 2021 as against 10.93 per cent by the end of first quarter of the previous fiscal.

In absolute terms, gross bad loans stood at Rs 7,022 crore at the end of June 2021, lower than Rs 10,558.53 crore recorded in the same period a year ago.

Net NPAs nearly halved to 2.22 per cent (Rs 2,352.75 crore) from 4.10 per cent (Rs 3,677.39 crore).



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , , ,

Why rising inflation impacts growth stocks

Personal Finance

[ad_1]

Read More/Less


Two school friends and veteran investors bumped into each other after decades in a coffee shop. As they sipped their cup, their ears perked up to a song ‘this is ourselves under pressure. Under Pressure.’

Veena: My portfolio has been under pressure recently. I was heavily invested in Nasdaq 100 funds, early stage technology and growth stocks and I thought they will continue to do well.

Ram: Some of them may do well in the long run, but in the short to medium term they will continue to remain under pressure if recently emerging concerns on inflation in the US persist.

Veena: Why should inflation or interest rates impact technology stocks.

Ram: Stock markets look to future earnings and discount it to net present value (NPV). When treasury yields move up on inflation concerns, your discounting rate increases and your NPV of earnings reduce.

Veena: Yes, but I still don’t understand why growth stocks should fall more than other stocks?

Ram: That is because the earnings of growth stocks are more back-end loaded. For example if you take a five-year period, most of the growth stock’s earnings may come only in the 4th and 5th year.Well-established companies which are likely to report consistent earnings..

Since the earnings are five years away, you need to discount it five times. When interest rates are low, it hence works in favour of growth stocks.

Veena: So, you mean when interest rates rise, the discounting rate increases and it impacts NPV of later year earnings?

Ram: Yes. Check this on excel. Assume discounting rate of 6 per cent and there are 2 companies A and B (growth) with same total earnings of ₹100 in 5 years, but A gives earnings of ₹20 for each of the 5 years, and B gives the earning of ₹100 only in the 5th year. NPV of A’s earnings is ₹84.25 and B’s is ₹74.73. Increase the rate to 8 per cent, A’s NPV is ₹79.85 and B’s, ₹68.06.

Veena: A’s NPV reduces by 5.2 per cent, while decline for B at 8.9 per cent due to the 2 per cent interest rate increase?

Ram: Bingo! Hence, growth stocks are under pressure.

[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , , , , ,

Marginal impact of SC verdict on moratorium on earnings

Banking & Finance

[ad_1]

Read More/Less


With banks gearing up to close the financial year and announce results for the fourth quarter and full fiscal 2020-21 in the coming weeks, analysts and experts believe that the Supreme Court verdict on loan moratorium will have marginal impact in terms of their earnings. It is expected that most lenders are likely to move into expansion mode now thanks to signs of economic recovery and improved credit demand.

“Our analysis indicates the earnings impact of the residual exposure is not very material,” said Edelweiss Research in a recent report.

Also read: Loan moratorium: SC orders full waiver of interest on interest

It has worked out three scenarios of such loans being 15 per cent, 20 per cent and 25 per cent of the moratorium books of its coverage banks. “The impact of a hit from loss of interest on interest for this moratorium period will, at most, result in a few basis points dent to the annual net interest margin, even if incremental costs are entirely borne by the banks and with no further government contribution,” it said.

Private sector lenders are set to announce their fourth quarter results in the coming weeks in April followed by public sector banks. HDFC Bank is scheduled to announce its results for the quarter ended March 31, 2021 and the fiscal year 2020-21 on April 17 while ICICI Bank will announce it on April 24.

A report by Axis Securities said it is not yet clear whether this incremental hit will be absorbed by the government or passed on to the banks.

“Even so, it will be a one-time hit and not have a material impact as it only pertains to interest on interest for five months period only. We expect that with NPA standstill withdrawn, banks will report actual NPAs in the fourth quarter of 2020-21 instead of reporting proforma NPAs, which could lead to some margin compression,” it said, adding that with better clarity on asset quality, banks with excess provisions such as ICICI Bank could result in some provision write-backs.

“On overall basis, we remain positive on banks due to improving macro-economic recovery feeding into better credit growth and limited asset quality disruption,” said Emkay Financial Services in a recent note.

Improved credit demand

Bankers have also been talking about increased credit demand in recent months.

CARE Ratings noted bank credit growth has stood largely stable compared to the last fortnight and returned to the levels observed in the early months of the pandemic (the bank credit growth ranged between 6.1 per cent to 7 per cent during March and February 2020).

“The credit growth stood at an almost similar level during the last two fortnights at 6.6 per cent and 6.5 per cent, marginally higher compared with last year’s level of around 6.1 per cent, as economic activities gather pace,” it said.

[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , , , , ,

Net profit rises 16% to Rs 1,853.5 crore; NII up 17%, BFSI News, ET BFSI

Banking & Finance

[ad_1]

Read More/Less


MUMABI: Kotak Mahindra Bank today reported a net profit of Rs 1,853.5 crore as against Rs 1,595.90 crore, reflecting a growth of 16 per cent on a year-on-year basis.

The lender reported a gross non-performing assets ratio of 2.26 per cent for the reported quarter as against 2.55 per cent in the previous quarter.

Notwithstanding the Supreme Court’s standstill on bad loan recognition, the lender said that the gross NPA ratio would have stood at 3.27 per cent in the December quarter and net NPA ratio would have been at 1.24 per cent.

The lender’s net interest income rose 17 per cent on year to Rs 4,007 crore, while the net interest margin was largely stable on year at 4.51 per cent.

The private sector bank reported a 4.5 per cent sequential growth in advances in the quarter to Rs 2.14 lakh crore, which fared better than most peers who have reported earnings so far. However, on a year-on-year basis the lender’s loan book fell 1.2 per cent reflecting the conservative strategy adopted by the bank since onset COVID-19 pandemic.

Kotak Bank said that its Covid-related provisions stood at Rs 1,279 crore as on December 31, while it has approved restructure of loans under the special recast window provided by the Reserve Bank of India to the tune 0.28 per cent of net advances.

The bank said that proforma net non-performing assets at the end of the December quarter stood at Rs 2,646 crore with provisions worth Rs 2,262 crore held against them.

The lender reported strong operating performance in the quarter as the operating profit jumped 29 per cent year-on-year to Rs 3,083 crore.



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , , ,