SBI is firmly in the saddle as far as policy leadership and collaboration with FinMin and RBI is concerned. The maket is already disappointed that the numbers were not live during the markets session presumably, but the after mmarket will see a surge in demand for the bank as the bank gets to a 3.3% NIM and establishes double dgit growth in credit much ahead of earlier leaders ICICI or new wannabes Kotak. Increases in provisions may be forgiven for the bank but are a minor setback, higher by $400million
With Capital ramp up to come to the extent of $4 bln, the growth augurs well esp as profits are good and estimates likely beaten. $750 mln in profits and a healthy NPA would have brought back yesterday's dream run for the stock as banks are crucial to India's game in 2011.
However, key is that as of now India is not the flavor of the day despite high attention interactions like Obama's visit where lower free float factor keeps our weightage in Emerging Market indices below Taiwan, Brazil and China, likely Korea and other smaller nations as well and needs to be revised early. Our financial services sector may brook no small measure of respect and lead the re-rating of India's capital markets.
Update: Including state Bank of Indore and increases in Provision cover to 62% to the RBI target of 70% the provisions of $655 million meant profits of only Rs 2350 Crores or $587 million but Net Interest Income soared to $2 billion or Rs 8000 Crores for the quarter 45% year on year growth making it a run rate far exceeding the annual business turnover of Rs 18000 crores for the full year ended March 2010(FY).
Net NPAs are a high 1.7% with Consolidated NII zooming to $2.86 bln or Rs 11460 Crores, Gross NPAs increasing to 3.35%. More consolidation exerccises are underway with the 8 remaining associates targeted for consolidation by 2012, SBM slated the last, while Hyderabad is currently to be underway. Last years Profit was however $750million and other income is higher at $1 billion beating estimates of reduced trading profits for the bank.
Growing Retail Banking, Credit Cards business
The size foot print is really improving for the bank and with nearly 10000 branches it looks well on target for that elusive priming punch to be delivered by Indian banking. They are seemingly ready to relaunch their credit card business for growth than for the industry wide pruning since 2008 as below from ET of Nov 2, incl a Platinum Card now on offer
In a remarkable development, SBI tanked after results as the NPA surge matched time cycles with Dollar bursting out of its "bearish reverie" Though undue analysis is unwarranted as we had factored this correction in our analysis yesterday, SBI in particular is just suffering integration pains as its NPA book or Gross quantum of Non performing credit/loans is a humongous $6.5billion ( almost $7) or Rs 27000 Crores up from 17000 Crores Given that the NIM is 3.45% it is unlikely to do much more than bring eons of other investors to the bank ( We are invested in the monthly gyrations of the stock now, for example) However, serious readers would have gleaned as much. We do believe India's re rating in MSCI indices is near as India ETFs have been in the Top 10 and investment inflows are a likely $35 billion by the time 2010 comes to a close, having already crossed Rs 1.2 T ( Lakh crores) or $25bln in October With a CASA of 48% on a standalone basis SBI is way ahead of competitors and a credit deposit ratio of well above 80% augurs well for the scrip SBI has slowly but surely been removing impediments to growth since its last restructuring exercise but with OP Bhatt stepping out after a long innings, the bank will be looking to find the key replacement for him due support in policy and leadership of the banking sector as governments get serious about expanding Indian Banking's spread corollary to the 30 year funds for infrastructure as evidenced by new likely quasi public investment funds in the space. Given the same another keen development worth watching would be the PE sale of Axis Bank which is duely hanging fire with public bank sponsors unlikely to give up their prerogative easily.The 'run' on banks and other such clarification posts