Chillin' out till it needs to be funded
State Bank of India Results came out at a supercharged run rate totting up profits of Rs 29.14 billion or $622 million up 25% year on year and up more than 56% Q-o-Q from less than $500mn a year ago. We said it here first! Advances improved to Rs 6.67 Trillion or $141.92 Billion even as Gross NPAs crossed 2% and the bank continued to enjoy the 20% uptick from an impaired loan loss ratio, marking new provisions of $360 mn every quarter to catch up to 70% required by RBI without affecting profitability . Unsecured retail advances grew 10% and NIM remained a healthy 3.19% compared to ICICI Banks 2.38% on a book one third the size of the giant. Income improved hedonistically to above INR 77bn or $1.64 billion making the bank an ideal FDI destination in the same league as the Chinese Banks if it maintains growth. Net NPAs grew 32% y-o-y and 1.87% over Q4 2010 and loan loss ratio will be improved over the next 3 quarters.
Net Interest Income overall grew 8.66% Q-o-Q to Rs 22.8 billion bringing cost of deposits down 15% while growing deposits to Rs 8.15 trillion. Net Interest Margin improved from 2.66% in Q4 to 3.18%
SBI’s credit growth estimates while cautious exceeded ICICI Banks 16-20% prediction. Advances grew 21% in Q1 and while investment sales fell, treasury income maintained a more than 50% contribution to the revenues. CASA target remains between 45-50% and cost of funds is among the lowest in the industry. Employee costs have been contained because of a write back of $170 million bringing it to $6.49 bn in keeping with the size of the bank’s 400000 employees across 6000 branches. The bank has been allowed by the government to bring down the cost of funds further 4% with the new funds approved to $3.4billion preferably through a rights issue.
Aviation: The bank is in charge of aviation debt restructuring but believes the sector needs more uptick to attract relevant equity support, whence debt of INR 63 billion can be restructured. Jet airways already removed itself from requests for restructuring as most of its share of INR 150 million is in long term leases
IIP: The June IIP continued to show base change effects with consumer durables redefinition showing up as 27.4% growth. Electricity went to a low 3% again and the IIP was a steady 7.1% but State Bank was able to bring the economic commentary back on track with consumer and corporate growth.
8 a.m. / 10 a.m. Global cues pushed markets lower in early trades providing immense buying opportunities in the growingly preferred India markets as China dip becomes a pronounced event to expect. State Bank of India remained on track to reporting best in class results expected income being INR 6474 Crores ($1.377 billion) Earnings are growing Q-o-Q to more than $500 million for the quarter showing strength in margins SBI has already published a Financial inclusion plan empowering goals like payment services, specified government payments to be extended to rural areas and to bring in an additional 100000 villages in its canvas by 2013. 100,000 such villages have been added till Jan 2010 from 2007.
Of the 99,600 Census 2001 villages 64000 are yet to be covered by SBI’s 6000 branches. Payments support thru Customer points has reached 135 districts out of 449, leaving competitors behind. Rural assets (excl loan and investment assets ) are likely to grow exponentially in the next phase of India’s growth.
New Bank candidates Religare and Rel Cap seem unlikely starters but Religare as a Religare Fortis combine may start th venture within Religare Enterprises Ltd. ADAG companies may come out again to raise jumbo capital as now required for corporates and NBFC to enter banking. RRBs are unlikely to be available off the shelf and there are no benchmarks for valuation of the same with BOR deal valuing branches as much as $7 million and branches meaning less in the context of a new market entry facilitation. Housing Finance cos are not expected to be a liability under the new regulations. Infrastructure NBFCs also remain strong policy directors in the Indian context. SBI continues to maintain national banking distribution strengths which make ICICI Bank seem insignificant in comparision esp as the integration with WOS like SB Mysore, and Hyderabad are taken up. Indore SBI has already been merged, integration completed.