State Bank of India (SBI) is an attractive play on a gradual recovery in Indian economy, with a healthy PCR (88% including Technical Write Off), robust Tier 1 capital ratio of ~11.9% and a strong liability franchise. Manageable asset quality outlook with a 97% collection efficiency, guidance of just Rs. 60,000 crore for FY2021 slippages and restructuring (~2.5% of gross advances), and only ~Rs 2,000 crore of provisions remaining provide comfort. Stock trades at 1.2x / 1.0x its FY2022E / FY2023E ABVPS which is reasonable;...

Limited retail/SME stress and corporate resolution reacceleration to limit NPAs/credit cost: SBI's GNPA has steadily declined to 5.3% since FY18. This is the lowest among PSBs and even better than that of ICICI. The bank also expects limited stress after Covid-19, given its relatively resilient retail book that includes secured mortgages and unsecured PL built largely around salaried govt. employees. ECLGS/restructuring should limit the stress in the otherwise risky SME portfolio. Improving prospects of resolutions in some large corporates should further reduce corporate NPAs. The bank now carries strong PCR on NPAs (71%), driven by strong PPoP on healthy...

Liquidation of excess cash to boost margins State Bank of India is India's largest bank. The bank operates 21,959 branches globally and has a vast network of 58,599 ATMs/CDMs. It provides a wide range of financial services, such as insurance, credit cards and asset...

SBIN appears well positioned to report strong uptick in earnings as the uncertainty brought about by the pandemic has receded significantly. While collection trends have improved to ~97%, restructuring of up to 1% of loans is expected. Further, legacy issues in the corporate NPA cycle is now largely behind. SBIN carries healthy PCR of ~88% on corporate NPA. We expect credit costs to normalize from FY22E. SBIN's focus has been on building a granular and high-quality portfolio. With retail growth back to pre-COVID levels and improving trends in Home loans, Auto loans, Gold loans, etc. we expect gradual deployment of excess liquidity toward...

SBIN has one of the strongest deposit franchises; this, along with inexpensive valuations, drives our BUY rating (SoTP value of Rs 317) State Bank of India: SBINs 2Q earnings were ahead of estimates, led by lower-than-expected provisions. The bank reported a sharp improvement in collection efficiency to 97% in 2Q. These have been common themes across most of our coverage this quarter. While we have reduced our slippage and provisioning estimates, they remain conservative. Despite the recent AT-1 and Tier 2 capital raise, we believe it will be prudent for SBIN to raise equity capital.

We maintain Buy on the stock with target price of Rs 261 (SOTP basis core book at 0.6x and subsidiaries at Rs 111)

SBI reported a healthy operational performance with NII surging 14.6% YoY on the back of sequential improvement in margins. Other income declined by 29% YoY and 10.2% QoQ as a result of higher base due to stake sale. Cost to income ratio for the bank increased by 514 bps QoQ to 55.16% led by one off wage provision of ~| 1600 crore. SBI has estimated total stressed loans worth | 60000 crore by the end of FY21, this is 2.5% of the loans. Fresh slippages estimated for H2FY21 stood at |20000 crore, apart from Q2FY21 unrecognised |14380 crore while total...

Earnings normalization begins sharply raise FY21/FY22E by 45%/24% State Bank of India (SBIN) reported a decent quarter, with healthy NII growth, led by margin expansion, and retail credit growth recovering to pre-COVID levels. On the asset quality front, potential slippages (without the SC order) increased to INR171b, led by the Agri and SME segments. Management indicated total restructuring of INR200b (~0.9% of loans) and a total asset quality impact of INR600b (including restructuring) in FY21E, corresponding to 2.6% of loans. Collection efficiency (CE)...

Pro forma NPAs were sharply higher at 5.88% (up 60 bps QoQ), led by slippages of Rs140bn or 2.5%. Over 60% of these came from the agri portfolio. However, ~Rs.60bn of these have been already upgraded in...

State Bank of India's (SBI's) Q2FY2021 numbers largely met expectations, wherein operational numbers were in-line, but asset quality performance was mixed. Collection efficiency for domestic loans (excl. agri loans) is at an encouraging 97%. However, on a normalised basis, asset quality deteriorated marginally, with GNPA and NNPA ratios increasing by 44 bps and 22 bps, respectively. Asset quality picture appears manageable, PCR of 88.2% is a cushion for investors; legacy assets are well-provided for; margins expected to be stable SBI currently trades at 0.8x / 0.7x its FY2022E / FY2023E book value; we maintain a Buy...

SBI strongly beat earnings estimates by 72% with a PAT of Rs45.7bn, aided by slightly better margins and contained provisions. Proforma slippages were relatively higher at Rs14.4bn. GNPA stood at 5.9% mainly from the SME/agri segment, but the bank has seen some pull-back in Oct'20. Overall collection efficiency has touched 97%, similar to large private peers. SBI expects restructuring to the extent of Rs195bn (0.9% of loans) and slippages in H2 (ex. proforma slippages) largely around BAU levels (Rs100bn in each quarter). The guidance looks optimistic, but management contends that its retail book remains resilient, built largely around...

State Bank of India (SBIN) is the largest public sector bank in terms of assets, deposits, branches, number of customers, and employees having pan-India presence. As of March 20, SBIN has a network of 22,141 branches and 58,555 ATMS.

Continued trend in Asset Quality improvement, steady 1QFY21 performance and attractive valuation reinforce our conviction that the bank is well placed to fight impending stress. However, the transition of the bank's top post is likely to be a key overhang. The pointers which acknowledge our conviction are: 1) In 1QFY21, gross slippages declined to 39.1bn v/s 82.9bn in the previous quarter, which resulted in decline in headline NPA ratios with GNPA at 5.44% (v/s 6.15% in 4QFY20) and NNPA at 1.86% (v/s 2.23% in 4QFY20). 2) A positive surprise on Loan under moratorium which reduced to 9.5% of loan amount against 23% declared earlier. 3) Business growth in line with industry aided by strong domestic NIMs (3.24% v/s 2.97% in the previous...

We initiate Buy on State Bank of India (SBIN) with a target price of Rs 240 (SOTP basis, valuing core book at 0.6x FY22E ABV and Subsidiary value at Rs 110). SBIN with business size of ~Rs 57trn is the largest commercial bank with ~22.8/19.7% market share in deposits/ advances in India.

We initiate Buy on State Bank of India (SBIN) with a target price of Rs 240 (SOTP basis, valuing core book at 0.6x FY22E ABV and Subsidiary value at Rs 110). SBIN with business size of ~Rs 57trn is the largest commercial bank with ~22.8/19.7% market share in deposits/ advances in India.

Well provided for; visibility on recoveries; downside risks limited State Bank Of India (SBI) reported strong earnings for 1QFY21, led by margin expansion (up 4bps to 3.01% on reported basis). We were expecting the margin to contract due to high liquidity of the balance sheet amid lack of credit opportunities. As a result, NII grew by 16.1% YoY and 17% QoQ. Domestic NIM improved by 23bps YoY and 5bps QoQ to 3.24%. Besides an improving asset quality and reduction in the quantum of reversals, what also supported the NIM was the reduction in cost of deposits (down by 46bps QoQ to 4.48%). Non-interest income was nearly flat YoY and down 40% QoQ. Fee income was down 13.7% YoY and 43.2% QoQ. Total opex grew by 2.1% YoY but was down 11.3%...

NIMs climb up significantly, costs of funds come lower: The bank's NIMs increased to 3.24% (up 23 bps YoY/30 bps QoQ) as Cost of Funds also fell to 4.37% (down 48 bps YoY/23 bps QoQ) for Q1FY21 as the bank passed on the benefits of fallen interest rates to the customers by decreasing its MCLR. The bank's CASA increased to 43.83% (43.53% in Q4FY20), as the...

Teamlease Services: Teamlease delivered an in-line revenue and better margin performance in what is being termed as a tough quarter. The impact of the pandemic was felt on core staffing (-14.4% QoQ) and specialised staffing (-5.3% QoQ). The core staffing headcount fell by 14.5% QoQ but was better than expected. EBIT margin expanded 56bps QoQ to 1.4% (estimate of 1.3%), led by tight cost control, higher core employee productivity, and increasing mark-up. The cash generation (OCF/EBITDA at 80%) improved due to lower withholding tax. Teamlease has ~40% exposure to high impacted verticals like infra, manufacturing, ENU, auto, and retail. The exposure to less impacted verticals like BFSI, agri, chemicals, essential retail, pharma, hospitality, and telecom is at ~60%. Recovery is expected in 2H with a flat 2Q. Karur Vysya Bank: KVB's 1QFY20 earnings were ahead of estimates, buoyed by higher-than-expected treasury gains. Even though the bank has seen elevated stress over an elongated period, asset quality risks are likely to remain elevated in the near term, especially with the sticky moratorium portfolio. Elevated provisions will depress return ratios in the near term; consequently, we assign a target multiple of just 0.6xFY22E. The appointment of new the MD & CEO, removes concerns around the leadership void at the bank. We maintain REDUCE with a target price of Rs 35. Reliance Industries: Our ADD rating on RIL with a price target of INR 1,992/sh is premised on (1) induction of Facebook, Google, Intel and Qualcomm as partners in Jio Platform, which should enable the company to accelerate the...

The bank further built COVID-19 provisions of INR18.4b, taking the total COVID related provisions to INR30b (15% on SMA accounts overdue on 29 NII grew 16% YoY (+17% QoQ) to INR266b with domestic NIMs improving by Other income grew 18% YoY, led by stake sale gains of INR15.4b in SBILIFE while opex growth moderated to 2% YoY (11% QoQ decline), and thus, C/I ratio improved to 50% (v/s 52.5% in 4QFY20). Total slippages declined to INR39.1b (0.7% annualized), facilitating a 13%/18% QoQ decline in GNPLs/NNPLs. PCR improved ~190bp QoQ to 67% Overall, 90.5% of term loans have paid two or more EMIs while the rest have paid less than two EMIs these include 4.2% in retail and SME, 3.3% in private corporates and the rest 2.0% are AAA or AA rated companies. Furthermore, moratorium availed in corporate accounts is much lower than expected while total COVID-19 provisions of INR30b and lower SMA book of INR17.5 (0.1% of loans) provides comfort.

State Bank of India (SBI) posted encouraging results with asset-quality improvement on a sequential basis, even as operational performance came mixed, aided by one-time gain of stake sale benefit of Rs. 1,539 crore from the subsidiary. However, weak other income and higher provisions expenses resulted in PPOP and PAT missing estimates. Net interest income (NII) came at Rs. 26,642 crore, up 16.1% y-o-y and 17% q-o-q, in line with estimates. Non-interest income came at Rs. 7,957 crore, flat y-o-y but was down by 40% q-o-q, mainly as the quarter saw impact of fee and charge waivers amidst pandemic. However, the key is the balance sheet strength and asset quality, on which parameters the bank fares well....