Tag: sbi share price

Can blockbuster results fuel further rerating of SBI stock?, BFSI News, ET BFSI

Banking & Finance

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MUMBAI: State Bank of India (SBI) continued to surprise Dalal Street on the earnings front as the lender posted another set of blockbuster numbers for the September quarter.

The state-owned lender’s net profit grew 67 per cent year-on-year (YoY) to Rs 7,627 crore in the quarter ended September 2021, while its net interest income (NII) climbed 29 per cent on-year to Rs 31,183.9 crore. Both the bottomline and topline of the lender came in above Street’s expectations.

That said, here are the major takeaways from the September quarter earnings of the lender:

Asset quality keeps improving
At the peak of the bad loans crisis of the financial sector, State Bank of India had some of the poorest asset quality numbers. Every quarter saw investors anxious about slippages and new NPA formation. Fast forward to 2021 and the lender is now surprising the Street on how healthy its balance sheet is becoming.

For the reported quarter, SBI reported a 42 basis points sequential decline in gross non-performing assets ratio to 4.9 per cent and a 25 bps decline in net NPA ratio to 1.52 per cent. Further, the provision coverage ratio has now gone up to 87.7 per cent for the lender.

Slippages benign
During the quarter the lender’s slippage ratio fell to 0.66 per cent from 2.47 per cent in the previous quarter. The state-owned bank added merely Rs 6,690 crore of loans to the watchlist in the quarter as against Rs 11,303 crore in the previous quarter.

The shrinking watchlist loans indicate that the lender is facing lower stress on its balance sheet that should free up more capital for growth purposes as the economy gets back up from the pandemic downfall.

Loan growth needs more push
SBI said that its advances in the quarter grew 6.2 per cent year-on-year, which was in-line with its overall guidance for the year. Interestingly, retail loans in the quarter jumped 15.2 per cent whereas home loans grew by 10.7 per cent.

With the balance sheet becoming healthier every quarter, SBI will hope to accelerate its lending business in the coming quarters. An increase in loan growth coupled with improving asset quality would force investors to rerate a lender that still trades at merely 7 times one-year forward earnings and 1.1 times one-year forward price-to-book.

Corporate loans struggling
The state-owned lender reported a near 4 per cent year-on-year decline in its corporate loan book suggesting that companies are still not ready to take on leverage to boost capacity.

However, investors expect that to change in the coming quarters as rapid demand creation in the economy on the back of reopening and higher vaccination rate will nudge companies to boost capacities in the coming year. SBI is considered by many brokerages as one of the primary beneficiaries of the private capex revival in the economy over the next five years.



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Chakri Lokapriya, BFSI News, ET BFSI

Banking & Finance

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SBI’s credit costs have come down and it looks like SBI has executed well, given the tough macro environment. The Covid related provisioning are largely within expectation and gives comfort that numbers for other banks will also hopefully be in line or better, says Chakri Lokapriya, CIO & MD, TCG AMC.

Just looking at SBI’s performance, the big takeaway from the numbers is the asset quality outcome, the fact that they have managed to brave the Covid-19 second wave impact. Slippages have come in at 2.47%, of which, a significant amount has already been pulled back in July. Do you think that is something that is going down well with the street?
It is absolutely right because going into the quarter, the economic backdrop had the services economy still in a contraction while the manufacturing sector was moving by stops and starts. There was a fear that slippages would increase from industries that take loans from SBI.

Now those slippages are under control. The 15,600 odd crore mark is a good number. Secondly, we know that credit growth is unlikely to pick up any time soon. The number reflects that 5% to 6% range whereas the deposit growth continues to remain strong. SBI’s credit costs have come down and it looks like SBI has executed well, given the tough macro environment. The Covid related provisionings are largely within expectation and gives comfort that numbers for other banks will also hopefully be in line or better.

Would a long-term investor be willing to buy the stock at the current levels?
Absolutely. The stock at the current levels still trades only at about close to its book value around one time for the medium to longer term investor. For a franchise as strong and big as SBI, one in four or five loans in this country is made by SBI.

Today whether it is corporate banking, retail banking or the government borrowings from banks, SBI has executed well. So even without multiple re-rating, the stock can go much higher. At this current rate it will probably hit north of Rs 600 in less than about a year’s time from now.

What are your views on HDFC Ltd?
After long underperformance due to slowing loan growth etc, hopefully things will improve for HDFC if there is no third wave. Also coming out of the current lockdowns, home loan growth rates are picking up while other forms of borrowing or lending has still not picked up. That is reflected both in the volumes of real estate companies as well as by the housing finance companies. I think given its underperformance, HDFC being the market leader along with LIC Housing and Repco, could do well in the next couple of quarters



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SBI to auction two NPA accounts to recover dues of over Rs 313 cr, BFSI News, ET BFSI

Banking & Finance

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NEW DELHI: SBI will auction two non-performing accounts (NPAs) next month to recover dues of over Rs 313 crore, according to a notice by the lender.

The two accounts to be put up for e-auction on August 6 are Bhadreshwar Vidyut Pvt Ltd (BVPL) with a loan outstanding of Rs 262.73 crore and GOL Offshore Ltd with Rs 50.75 crore dues.

“In terms of the bank’s policy on sale on financial assets, in line with the regulatory guidelines, we place these accounts for sale to ARCs/banks/NBFCs/FIs, on the terms and conditions indicated there against,” SBI said in the notice.

The reserve price for the auction of Bhadreshwar Vidyut is set at Rs 100.12 crore and for GOL Offshore at Rs 51 crore.

SBI has asked the interested parties to do the due diligence of these assets with immediate effect, after submitting expressions of interest and executing non-disclosure agreement with the bank.

“We reserve the right not to go ahead with the proposed sale at any stage, without assigning any reason. The decision of the bank in this regard shall be final and binding,” SBI said.

BVPL was set up in 2007 as a special purpose vehicle promoted by OPG group, having substantial experience in power and steel sectors. In April 2019, ICRA moved the long term rating on bank facilities to the tune of Rs 2,062.40 crore to the company to ‘Issuer Not Cooperating’ category.

ICRA said it had been trying to seek information from the company to monitor its performance, but despite repeated requests, the management of the company remained non-cooperative. It had also advised lenders and investors of the company to exercise appropriate caution while using the rating action as it might not adequately reflect the credit risk profile of the company.

The Mumbai based GOL Offshore is engaged in the business of providing services to oil and gas extraction, excluding surveying.



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