Accumulate state bank of india akash jain – moneycontrol.com electricity outage chicago

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In Q4FY18, the bank’s revenue witnessed a growth of 18.6 percent on YoY basis to Rs 68,436 crore. NII stood at Rs 19,974 crore as against Rs 21,065 in the same quarter last year. The bank has reported net loss of Rs 7,718 crore for the quarter, against profit of Rs 2,814.8 crore reported in corresponding quarter last year due to a surge in provisions and bad loans. This was the second highest quarterly loss figure reported by any bank after Punjab National Bank reported a Q4 FY18 loss of Rs 13,417 crore.

The bank witnessed 4.9 percent advances growth on YoY basis and 6 percent QoQ to Rs 20.48 lakh crore in Q4FY18. Loan book break up as of FY18 end is 43 percent Corporate and 57 percent Retail. Management expects this mix to move toward 60:40 in favour of retail. Deposits as of FY18 end stood at Rs 27.06 lakh crore.

Management expects GNPA to reduce by Rs 50,000 crore in FY19. The bank has identified Rs 26,000 crore as stressed of which Rs 10,575 crore are from power sector. Slippage should not exceed Rs 16,000 crore from this pool. PCR on this pool is 18 percent.

SBI has a watch-list of assets for FY19 of Rs 25,800 crore (Note that SDR accounts slipped into Q4FY18 and 5 S4A accounts are included in the watchlist). Power-sector loans worth Rs 10,575 crore sit on its watchlist of loans for FY19, which includes all corporate special mention account (SMA)-2 loans and stressed SMA-1 loans.

The expected haircut on NCLT-1 is 52 percent (to be resolved by 1HFY19), which is lower than provisions currently held. In NCLT-2 (to be resolved by 2HFY19), the bank hopes to recover in excess of 25 percent. The bank has written back Rs 2420 crore of provisions related to NCLT accounts where there is reasonable confidence of recovery.

Non-RBI directed NCLT exposure stood at under Rs 3,000 crore (115 cases). All NCLT accounts stand classified as NPLs by the bank. Power-sector loans worth Rs 10,575 crore sit on its watchlist of loans for FY19, which includes all corporate special mention account (SMA)-2 loans and stressed SMA-1 loans. In fact, all the loans restructured earlier under various restructuring schemes of RBI – SDR, S4A etc. have been accounted as NPAs.

Overall Provision Coverage ratio for the quarter stood at 66.17 percent as against 65.9 percent QoQ. The bank has provided 75 percent against NCLT II List. The resolution for NCLT II cases is expected to happen by FY19 end. Overall PCR at 50.5 percent (without ACUA) should increase to 60 percent in FY19 as per Bank’s Chairman, which we believe is achievable.

At current market price of Rs 267, the bank trades at P/BV of 1.16 x (FY 18 Book Value stands at Rs 230) and at adjusted Book Value (after deducting Net NPAs), the stock trades at P/BV of 2.5x. Long term investors with a horizon of five years can accumulate it. Disclaimer: The author is Vice President – Equity Research, Ajcon Global. The views and investment tips expressed by investment expert on moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.