Stock Analysis -State Bank of India Special Report By www.capitalheight.com

Stock Analysis – State Bank of India

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CONTENTS

Introduction
Company profile
Financials

Fundamental analysis
Fundamental factors
Key Extracts

Technical Analysis
Pivot Point
Daily chart


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Introduction
The evolution of State Bank of India can be traced back to the first decade of the 19th
century. It began with the establishment of the Bank of Calcutta in Calcutta, on 2 June
1806. The bank was redesigned as the Bank of Bengal, three years later, on 2 January
1809. It was the first ever joint-stock bank of the British India, established under the
sponsorship of the Government of Bengal. Subsequently, the Bank of Bombay
(established on 15 April 1840) and the Bank of Madras (established on 1 July 1843)
followed the Bank of Bengal. These three banks dominated the modern banking
scenario in India, until when they were amalgamated to form the Imperial Bank of India,
on 27 January 1921.

The State Bank of India emerged as a pacesetter, with its operations carried out by the
480 offices comprising branches, sub offices and three Local Head Offices, inherited
from the Imperial Bank. Instead of serving as mere repositories of the community's
savings and lending to creditworthy parties, the State Bank of India catered to the needs
of the customers, by banking purposefully. The bank served the heterogeneous
financial needs of the planned economic development . The corporate center of SBI is
located in Mumbai. In order to cater to different functions, there are several other
establishments in and outside Mumbai, apart from the corporate center. The bank
boasts of having as many as 14 local head offices and 57 Zonal Offices, located at
major cities throughout India. It is recorded that SBI has about 10000 branches, well
networked to cater to its customers throughout India.

State Bank of India is the country’s largest commercial bank in term of profit, assets,
advances, deposits, branches and employee. SBI played a extremely important role in
developing India, providing the financing needed to modernize the country’s agriculture
industry and develop new irrigation method and backing the creation of dairy farming as
well as pork and poultry industry. The Bank also provides the backing for the
development of country’s infrastructure.


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STOCK INFORMATION
Sector Banking

Market cap Rs.119935 cr

Face value Rs. 10

Book Value Rs. 1309.47

EPS(ttm basis) Rs. 159.22

52 week H/L Rs. 3515/ 1872

AVG. Daily vol (2wk) 5.07/9.05 lacs

Credit- Deposit 76.11%

Dividend 16.29%

Managing Director Pratip Chaudhuri

Listed At NSE/BSE

Equity capital Rs. 634.88 cr

SHARE HOLDING PATTERN
(in %) 11-JUN 10-MAR 10-DEC

Promoter 59.40 59.40 59.40

FII 10.88 12.80 13.36

DII 17.45 16.57 15.59

Others 12.27 11.23 11.65


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STOCK PRICE INFORMATION

119935 Industry
Market Cap * EPS (TTM) 109.19 * P/E 17.3 7.57
.43 P/E

* Div
* Book Value 1023.4 * Price/Book 1.85 Div(%) 300.00% 1.59
Yield(%)

Financials

Balance Sheet of SBI (Rs. Cr.)

Mar '11 Mar '10 Mar '09 Mar '08 Mar '07

Sources Of Funds

Total Share
635 634.88 634.88 631.47 526.3
Capital

Equity Share Cap 635 634.88 634.88 631.47 526.3

Reserves 64,351.04 65,314.32 57,312.82 48,401.19 30,772.26

Net Worth 64,986.04 65,949.20 57,947.70 49,032.66 31,298.56

Deposits 933,932.81 804,116.23 742,073.13 537,403.94 435,521.09

Borrowings 119,568.96 103,011.60 53,713.68 51,727.41 39,703.34


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Total Debt 1,053,501.77 907,127.83 795,786.81 589,131.35 475,224.43

Other Liabilities &
105,248.39 80,336.70 110,697.57 83,362.30 60,042.26
Provisions

Total Liabilities 1,223,736.20 1,053,413.73 964,432.08 721,526.31 566,565.25

Application Of Funds

Cash & Balances
94,395.50 61,290.87 55,546.17 51,534.62 29,076.43
with RBI

Bal. with Banks 28,478.65 34,892.98 48,857.63 15,931.72 22,892.27

Advances 756,719.45 631,914.15 542,503.20 416,768.20 337,336.49

Investments 295,600.57 285,790.07 275,953.96 189,501.27 149,148.88

Gross Block 13,189.28 11,831.63 10,403.06 8,988.35 8,061.92

Accumulated
8,757.33 7,713.90 6,828.65 5,849.13 5,385.01
Depreciation

Net Block 4,431.95 4,117.73 3,574.41 3,139.22 2,676.91

Capital Work In
332.23 295.18 263.44 234.26 141.95
Progress

Other Assets 43,777.85 35,112.76 37,733.27 44,417.03 25,292.31

Total Assets 1,223,736.20 1,053,413.74 964,432.08 721,526.32 566,565.24

Contingent
585,294.50 429,917.37 614,603.47 736,087.59 259,536.57
Liabilities

Bills for collection 205,092.29 166,449.04 152,964.06 93,652.89 70,418.15

Book Value (Rs) 1,023.40 1,038.76 912.73 776.48 594.69


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Key Extracts
State Bank of India (SBI) reported net profit of Rs15.8bn down 46% YoY, but ahead
of our expectations (PLe Rs7.3bn) due to a strong NII growth of 33% YoY and 20%
QoQ. Adjusted for one-off provisions for Rs18bn & MTM hit Rs10bn the adjusted
pre-tax earnings grew by 28%YoY vs reported decline of 33%YoY..

Strong NII was primarily driven by margin expansion of 44bps YoY & 55bps QoQ
(adjusted for Q4FY11 one-offs margins likely to have expanded 30-40bps QoQ).
Other positives include strong saving balance traction up 21% YoY and 6.5% QoQ.

CASA ratio stood at 47.9% up 38bps YoY but down 77bps QoQ due to 22% QoQ
decline in current account floats primarily due to seasonality impact.

SBI has done a 50bps PLR hike in mid Q2FY12 and bulk of its 1000-day deposits
contracted at 10-11% are due for repricing during Q2FY12, hence expect marginal
improvement in NIMs QoQ.

The annualized slippages in the agriculture and SME portfolio are at 7-8% with 20-
25%YoY loan growth. We have been highlighting that asset quality could be a wild
card and it doesn’t seem to relent. Management also declined from giving any
slippage guidance which substantiates the lack of visibility in forecasting the NPLS

Management is hopeful that slippage trend will improve in H2FY12; we have
factored in a slippage of 2.8% (Rs208bn) & 2.2% (Rs200bn) with credit costs of
1.3% and 1% for FY12 & FY13 respectively.


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Fundamental View
SBI has delivered relatively better performance on most of the operating parameters
during the quarter. Sharp margin improvement, strong CASA ratio, steady loan
growth and improving operating efficiency were key positives while higher slippages,
MTM loss, higher LLP and slower growth in core fee income adversely affected
reported earnings
Margin expansion outlook, steady loan growth, improving cost efficiency ratio,
superior liability franchise and largest branch network are key value drivers for the
stock in medium term.
Cost to income ratio improved 750bps q-o-q led by decline in employee costs and
other operating expenses. Notably, the bank had provided fully towards employee
pension provisions in Q4FY11.
Deposits grew by 16.5% y-o-y driven by strong growth in savings deposits. CASA
deposits grew by 18.8% and domestic CASA ratio stood at 48.7%.
Fee income growth was strong at 9.0% y-o-y and down 29% q-o-q while treasury
gains were healthy at Rs 169 crore.
Steady loan growth at 18.7% and 55bps NIM expansion positively surprised us. NII
grew by 32.8% y-o-y.
Healthy performance of associate banks & subsidiaries: Associate banks posted net
profit of Rs 736 crore vs Rs 665 crore in Q1FY11 up 11% y-o-y. SBI life and SBI
capital markets reported Rs 144 and Rs 84 crore respectively. Consolidated
earnings were down 20% y-o-y largely attributable to subdued bottom line
performance at the standalone level.
The management has indicated 16-19% loan growth and 20-22% deposit growth for
the current fiscal.


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Technical View
Pivot Points (Daily)
SCRIPT R4 R3 R2 R1 P S1 S2 S3 S4
SBI 2226 2121 2015 1951 1909 1846 1803 1697 1592

Pivot Points (Weekly)
SCRIPT R4 R3 R2 R1 P S1 S2 S3 S4
SBI 2592 2376 2161 2024 1945 1809 1730 1515 1299

Moving Averages
Moving Averages 20 Day 50 Day 100 Day 200 Day

Daily 2151 2305 2386 2543
Weekly 2397 2674 2478 2029

Fibonacci Retracement
Time Frame 0.0% 23.6% 38.2% 50.0% 61.8% 76.4% 100%

Weekly 3457 2855 2487 2171 1877 1508 893


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Chart Analysis

In the weekly chart above, SBI has broken its long-term uptrend and
completed one cycle and peaked out back in 2010 at 3500 level. The
stock is now in downtrend making lower tops and lower bottoms
since 8 months and recently it has broken its 200 SDMA on the
weekly chat, a very bearish signal. If we take retracement of its
uptrend from 2008 to 2011, The stock has retraced/corrected more
than 61.8%. If SBI sustains the level of 1850, then it can see some
pullback and retrace back to make a higher top at around 2000 level
of 50.0%. But Given the overall bearish market trend & if it breaks
the level of 1850 in coming weeks, then can further slide to its
76.4% retracement level to make a lower bottom at around 1550-
1600 range.


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