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.

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...

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%...

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....

SBI is India's largest commercial bank with balance sheet size of ~INR39tn and a market cap of ~INR1.6tn.

We believe, that current valuations across our coverage do not adequately capture potential downside risks to earnings under scenario III & IV, especially after the recent run up. It is difficult to assign probabilities to individual scenarios. However, we believe, it is evident that across scenarios, banks with healthy B/S (CRAR, PCR and liability franchises) are well placed to absorb shocks. Consequently, we continue to prefer large private banks such as ICICIBC (SoTP of Rs 442) and AXSB (SoTP of Rs 541). SBIN (SoTP of Rs 270), too, offers a favourable risk reward trade-off, despite its earnings vulnerability. Amongst the mid-tier banks we prefer CUBK (TP of Rs 164). Even as the nationwide lockdown gradually lifts, there is more than enough evidence to suggest that the economic impact of COVID-19 is set to continue. Contextually, for banks, liability franchises and potential asset quality outcomes have come to be of paramount importance, and rightly so. In our earlier note, entitled Double whammy for some, we focussed on the liabilities aspect.

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...

State Bank Of India (SBI) reported NII of Rs228bn, down 18% QoQ on account of exceptional income booking on key resolutions in 3QFY20 (NII was nearly flat YoY). Despite in-line advances growth, the poll 2020. Click Here NIM was lower than expected. Reported NIM was 2.97%, down 8bps QoQ. Cost of deposits fell by 3bps QoQ to 4.94%. NIM should find some support from the recent deposit rate cuts by the bank despite FY21 being a year of high balance sheet liquidity across the sector. Management commentary suggests that the bank is looking to deliver ~3.2% NIM on a sustainable basis. Advances growth was 6.4% YoY/5.7% QoQ, driven by 18% growth in the international portfolio and 15% YoY growth in the retail segment (in the domestic book). Management seems upbeat on growth prospects from balance...

We recommend a BUY on STATE BANK OF INDIA with a Target Price of Rs 220, an upside of 12% from CMP of Rs 196 and Stop Loss Rs 184.

Asset quality was in line with fresh slippages at | 8105 crore vs. | 16525 crore QoQ led by NPA recognition in agri at | 5238 crore. Corporate slippage was lower at | 1561 crore vs. | 9467 crore (includes HFC) vs. | 3239 crore QoQ. GNPA saw a dip QoQ to | 149092 crore from | 159661 crore. Consequently, GNPA ratio declined 25 bps to 6.15% from 6.94% QoQ while NNPA ratio declined 42 bps QoQ to 2.2%. Overall PCR ratio increased QoQ to 83.62% from 81.73%. SMA1 and 2 (watch list) were at | 3594 crore (| 4424 crore) from | 3692 crore (| 3677 crore), respectively, in Q4FY20....

Maintain BUY with an SoTP value of Rs 270 (0.75xFY22E ABV + Rs 113 subs value). SBINs 4Q core and net earnings were below estimates. Asset quality improved, even if one adjusts for the standstill classification impact, but this improvement was aided by higher w/os. The moratorium % is unusually low (vs. peers) and the related disclosures were ambiguous. Further, COVID-19 related provisions (Rs 9.4bn) appear low, in context of those made by peers as well as SBINs asset quality track record. Consequently, weve reduced our earnings to factor in higher provisions (driven by higher anticipated stress). The term of SBINs current chairman is set to end in Oct-20, this creates additional uncertainty. However, current valuations and a strong deposit franchise underpin our stance.

Led by lower NII growth and higher provisions, SBI reported lower than estimated PAT of Rs 35.8bn (~Rs 16.7bn ex-SBI Cards stake sale). Higher agri slippages (Rs52bn) during Q4 impacted NII growth as the...

SBIN reported a modest quarter with weak NII growth (affected by higher interest reversals on Agri slippages), although stake sale gains from its cards subsidiary supported earnings. Overall, the bank maintains a PCR of 73% on Power sector NPAs. Total slippages declined to INR81.0b (v/s INR165.3b in 3QFY20) on decline across segments, with the Corporate segment accounting for INR15.6b, SME INR2.3b, and Retail INR6.0b. SBIN holds higher provision coverage on power NPAs SBIN currently does not have exposure to any large-ticket corporate account; thus, the slippage trajectory is expected to remain under 2% in the current COVID-19 crisis. Among the PSU banks, SBIN remains the best play on the gradual recovery in the Indian economy, with a healthy PCR of 65% (84% including TWO), robust capitalization (Tier 1 of ~11.0%), a strong liability franchise, and improved core performance in a very challenging environment.

State Bank of India (SBI) posted mixed results, wherein, on one hand, operational performance came below expectations, but reasonable moratorium book and sequentially improved asset quality were positives. The bank has stated that there are around 23% customers who have opted for moratorium and have missed two or more instalment payments. This is reasonable, given the size and the nature of the bank's customer profile. Net interest income (NII) came in at Rs. 22,767 crore, down 18% q-o-q and flat y-o-y. There was an exceptional nature of gain of Rs. 2,731 crore (due...

State Bank of India (SBI) posted mixed results, wherein, on one hand, operational performance came below expectations, but reasonable moratorium book and sequentially improved asset quality were positives. The bank has stated that there are around 23% customers who have opted for moratorium and have missed two or more instalment payments. This is reasonable, given the size and the nature of the bank's customer profile. Net interest income (NII) came in at Rs. 22,767 crore, down 18% q-o-q and flat y-o-y. There was an exceptional nature of gain of Rs. 2,731 crore (due...