SBI 1QFY20 result update: Profitability sequentially better, pace of improvement disappoints.Mrunmayee Jogalekar
Dated: 5th August 2019
- Advances grew by 14% YoY to Rs 21,347 bn. Indian retail book growth was 17% while corporate book growth was 12%. Foreign advances book grew by 16%.
- NII was Rs 229 bn, 5% higher YoY. Overall NIMs at the Bank level marginally improved to 2.81% from 2.78% in 4QFY19.
- Total operating expense was 7% higher YoY. The increase was due to higher employee provisions on account of decline in bond yields.
- Provisions were 52% lower YoY and 44% lower QoQ. The total provisions number was lower due to provision write backs of Rs 24 bn. NPA provisions were Rs 116 bn in 1QFY20 vs. Rs 130 bn in 1QFY19 and 173 bn in 4QFY19.
- Reported PAT was at Rs 23 bn vs Rs 48 bn loss reported in 1QFY19 and Rs 8 bn profit in 4QFY19.
- Asset Quality was stable on a sequential basis with GNPA and NNPA at 7.53% and 3.07% respectively.
- Slippages were high in 1QFY20 at Rs 162 bn compared to Rs 99 bn and Rs 75 bn in 1QFY19 and 4QFY19 respectively. Reasons for this jump include Rs 20 bn exceptional agri slippages in one state on account of farm loan waiver, higher SME slippages due to absence of RBI dispensation which was available in 1QFY19, Rs 20 bn due to some technical issues in an account that is being serviced regularly.
- Out of Rs 116 bn NPA provisions made in 1QFY20, Rs 23 bn was provided against 2 accounts that are standard but need proactive provisions as per a recent RBI circular.
- Management has guided to credit costs of 140 bps for FY20E. This includes any additional provisions that may be required for the 2 specific currently standard accounts (DHFL and one renewable energy account). This credit cost guidance is higher than the previous guidance of 100 bps.
- Management is expecting loan growth of 12% and NIMs for the overall business of 3.15% in FY20E.
- In the current scenario, management expects to achieve core RoA of 0.5-0.6% in FY20. Gains from recoveries or subsidiary stake sale will be over and above this return guidance. This is lower than previous comparable guidance of 0.70-0.75%
Consensus estimates (Source: Marketscreener website):
- The stock price was Rs 300/- as of 5-Aug-19 and traded at 1.17x/ 1.04x the consensus Book Value for FY20E/21E BV of Rs 256/286 respectively.
- Consensus target price is Rs 376/- implying P/B of 1.31x for FY21E BV of Rs 286