Tag - deposits

09 Sep

COVID-19 has led to a delay in recovery – Yes Bank

On Tuesday, Nifty ended 0.3%, lower than the previous close at 11,317. The top gainers for Nifty 50 were BPCL (+2.8%), HCL Tech (+2.0%), and Infy (+1.4%) while the losing stocks were Infratel (-8.1%), ZEEL (-4.7%), and Tata Motors (-4.5%). The only sector in green was IT (+1.2%). The top losing sectors for the day were Media (-3.0%), Realty (-1.7%), Pharma (-1.6%) & PSU Bank (-1.6%).

Edited excerpts of an interview with Mr Prashant Kumar, MD & CEO, Yes Bank Ltd; dated 07th September 2020 from CNBC TV 18:

The recovery target would be for the entire stressed book; it is an issue about the timing. Due to COVID, the targets which the bank was expecting during FY21E have slowed down a bit. But he thinks that the bank is absolutely on track and during the current year and going forward he is confident that they will be able to recover.
Yes bank has seen a 22% cost reduction in 1QFY21. Yes Bank is targeting cost reduction of at least 10% year-on-year (YoY), but because of COVID, everything is not working in the way it used to work in the past. So, he thinks that is helping them to reduce costs further. They are working on the current situation. The Bank has launched a programme which allows a sizeable portion of the workforce to work from home which will be convenient for the younger generation & women associated with the bank.
Yes Bank already has provision coverage of almost 76% on their loan book. This loan book with 76% coverage where the estimates of loss given default (LGD) is something around 60-65%. So, that kind of loan assets can very easily move to SPV.
Talking about Dish TV stake of 24% with Yes Bank, Mr Kumar said that every case has its own merits and reasons for taking a specific course of action. In the case of Dish TV, they are evaluating the different options. He further added that there are a number of suitors for Dish TV and that they are looking for the best deal.
Deposits have seen 11% QoQ growth in 1QFY21. Going forward, he sees good progress on deposit front. There is deposit accretion seen. As of March 2020, the corporate & retail contribute is 50:50. The bank is also able to protect their margins accordingly.
Loan Book recoveries rate elongated due to COVID situation.
Yes bank looking for three partners on life as well as non- life.

Consensus Estimate: (Source: market screener website & investing.com)
The closing price of Yes Bank Ltd was ₹ 14/- as of 08-September-2020. It traded at 0.8x/0.5x/1.0x the consensus book value estimates of ₹ 17.0/29.0/13.5 for FY21E/FY22E/23E respectively.
The consensus target price of ₹ 28/- implies a PE multiple of 2.1x on FY23E EPS of ₹ 13.5/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

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05 Feb

SBI Cards IPO to hit the market this quarter: SBI Chairman

Update on the Indian Equity Market:

On Tuesday, NIFTY ended positive at 11,979 (+2.3%). The top gainers in NIFTY were TITAN (+7.3%), Infratel (+5.7%) and IOC (+5.6%). ZEE (-5.3%), Bajaj Auto (-3.8%) and Yes Bank (-2.8%) were the top NIFTY losers. All the sectors were in the green. The top sectoral gainers were Metal (+3.3%), Financial Service (+2.9%) and Realty (+2.8%).

Excerpts from an interview with Mr Rajnish Kumar, Chairman, State Bank of India (SBI) that was published in Economic Times on 03rd February 2020:

  • SBI believed that no one needed an insurance cover as far as deposits in SBI are concerned. But as far as the system is concerned, after the problems with the cooperative bank which happened in Mumbai, there was a demand that the limit for insurance cover which was set some 27 years ago needs to be revised. This move was much needed and will create more confidence in the minds of the people about banks.
  • AGR Telecom problems: According to him, the matter is sub judice and will be waiting for the Supreme Court decision. The hearing is on 4th February. He thinks and believes that the matter will ultimately be sorted out to the satisfaction of both the parties – the government and the telecom operators. He had a general discussion with a lot of people in the telecom sector where they hinted that they will have at least three to four large telecom operators and the country cannot be served with a lesser number of telecom operators. This has given Mr Kumar  confidence and hope that this matter will get sorted out.
  • Barring one HFC account, things are looking up at least on the corporate recovery front.  This HFC account was in trouble, and SBI was readying for it since September and had started providing for it. Mr Kumar had said in the past that from the recovery and resolution perspective, December and March quarters are likely to be very good for the banking system. SBI is expecting some good resolution and implementation of resolution plans in respect of a couple of large accounts.
  • The loan growth for SBI was around 7% in this quarter coming from their international banking book. There is more demand for foreign currency borrowings from Indian corporates. The retail story is intact and SBI is growing very well. The only thing is the corporate sector demand revival. The loan pipeline is fairly good. As these loans get disbursed, FY21E growth numbers may turn out to be better than FY20. The utilization of limits definitely improved in the last two months and SBI may end up somewhere around 9% YoY growth.
  • The loan processing fee has improved significantly on a QoQ basis for SBI. It indicates that during the December quarter, SBI has processed more proposals. The loan pipeline is of more than Rs 1 lakh crore and all of these loans will get disbursed eventually over the next six months and that is a good indicator from a recovery point of view.
  • SBI Card valuation: According to him, the penetration of credit cards in India is very low and as the economy develops, there will be demand for credit and credit cards. At the same time, SBI card business is growing decently. SBI IPO is expected to happen in this quarter.
  • He said that the move by the government to divest stake in IDBI Bank and list LIC are two measures that stand out in this year’s budget.

Consensus Estimate: (Source: market screener website)

The closing price of SBI was ₹ 306/- as on 4-February 2020. It traded at 1.2x/ 1.1x/ 1.0x the consensus book value of ₹ 249/ 280/ 317 for FY20E/ FY21E/ FY22E respectively.

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30 Oct

SBI: Retail Advances drive the Advances growth

Update on the Indian Equity Market:

On Tuesday, NIFTY closed 1.4% higher at 11,787 points on hopes of fresh tax reforms that may lower taxes applicable to capital markets. In the sector-wise performances, Auto (+4.3%) and Metal (+4.0%) were the top gainers while Media (-0.3%) was the only sector to close in the red. Amongst the NIFTY 50 Stocks, TATAMOTORS (+16.6%) , JSWSTEEL (+6.7%), TATASTEEL (+6.4%) and YESBANK (+6.3%) were the top gainers while INFRATEL (-9.0%) and BHARTIARTL (-3.3%) were the top losers.

SBI: Retail Advances drive the Advances growth

Key takeaways from the interview of Mr Dinesh Kumar Khara, MD SBI; dated 29th October 2019 on ET Now:

  • While talking about the State Bank of India (SBIN) 2QFY20 results, the advances grew ~9% YoY and deposits grew ~8% YoY. The retail advances did well. The retail personal advances growth of ~19% drove the overall advance’s growth. Corporate advances reported muted growth.
  • Slippages have come down YoY by ~18% and credit cost are at sub 2% levels.
  • Net Non-Performing Assets (NPAs) at 2.79% and Provision Coverage Ratio (PCR) has gone up to 81%+.
  • Corporate investments are awaited and the utilisation levels are pretty low. Mr Khara expects the utilisations to go up.
  • Personal loans grew by ~19% YoY. There is a lag on the demand on the street and the investment which comes through and the corporate credit demand.
  • The provision for wage increase is a significant component of the cost to income. The PCR is much higher than the Loss Given Default (LGD). This will result in the credit cost to come down going forward.
  • The sale of subsidiary drove the bottom-line growth in 2QFY20. SBIN not looking for any further divestment.
  • The real credit growth and demand pickup in the economy will become from the real economy.  Banks are geared up to meet the demand from the corporate side. Banks have tightened underwriting standards after recent experiences and continue to lend.

Consensus Estimate (Source: market screener and investing website)

  • The closing price of SBIN was ₹ 280/- as of 29-October-19. It traded at 1.11x /1.0x /0.86x the consensus Book Value for FY20E / 21E / 22E of ₹ 253/283/325 respectively.
  • Consensus target price of ₹ 372/- implies a Price to Book multiple of 1.14x on FY22E Book Value of ₹ 325/-.
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24 Sep

HDFC Bank (HDFCBANK): Bank to cash on the festive demand

Update on the Indian market

On Monday, NIFTY continued the rally for the second consecutive trading day after Friday’s announcements of tax measures and revisions in GST rates leading to earnings upgrade of the companies. NIFTY closed 2.9% higher. The sectoral indices’ performance reflected the key beneficiaries of the change in tax rates with NIFTY BANK (+5.4%), NIFTY Financial services (+5.4%) and FMCG (+4.4%) were the biggest gainers while NIFTY IT (-2.9%) and NIFTY Pharma (-2.2%) were the losers. The biggest gainers were BPCL (+13.7%), LT (+9.1%), BAJFINANCE (+9%), EICHERMOT (+9%) while the highest losers were ZEEL (-8%), INFY (-5%).

HDFC Bank (HDFCBANK): Bank to cash on the festive demand

Key takeaways from the interview of Mr Aditya Puri, MD, HDFC Bank; dated 19th September 2019 on CNBC TV 18:

  • HDFC bank has made higher provision for Agri loans but the actual defaults are not high. Agri loan slippages were one-off and will come down post-harvest.
  • HDFC bank created contingency provisions as per RBI norms for NBFCs and for corporates which don’t have unhedged exposure. These provisions are expected to go away this quarter.
  • The cost to income ratio is expected to go down by 5% in the next 5 years for HDFC bank.
  •  Banks are not allowed to lend for land. In the real estate sector, commercial real estate is doing well. The middle, slightly above middle and affordable housing continues to see demand. The concessions announced by the finance minister of India are only for affordable houses. The Luxury flats, are the ones which will not benefit and the prices will eventually be determined by the market.
  •  HDFC Bank is looking ahead to a very good festive season of Diwali. From 27th September 2019 to 31st December 2019; HDFC Bank is coming up with a Diwali Dhamaka offer which will provide lower cost, cashback and discount from the vendor to the customers. HDFC Bank will give ~7-10% cashback over and above the discounts given by the vendor partners. HDFC Bank will maintain NIMS of ~4.3%.
  • On talking about the linking to external benchmark rates, Mr Puri mentioned that HDFC bank doesn’t have many floating loans. He mentioned that floating rate deposits are not feasible. There is a lot of pressure on banks to transmit lower rates, but there is a need for the debt market reforms. 

Consensus Estimate (Source: market screener website)

  •  The closing price of HDFCBANK was Rs 1,255/- as of 23-September-19. It traded at 4.1x / 3.6x / 3.0x the consensus book value for FY20E/ FY21E/ FY22E of Rs 308/ 351/ 413 respectively.
  • Consensus target price of Rs 2,661/- implies a P/B multiple of 6.4x on the FY22E book value of Rs 413/-

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