State Bank of India (SBI) Stock Analysis | Q2FY21 Results Analysis

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SBI Q2FY21 Results Analysis

Introduction

State Bank of India (SBI) is the largest bank in India and recently declared its Q2FY21 results. Bank’s standalone net profit jumped 52% on YoY basis and 9% on QoQ basis. Let us do a results analysis of quarterly results of SBI Bank.

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SBI Quarterly Performance Review

State Bank of India Q2FY21 Results

State Bank of India (SBI) Q2FY21 standalone results
  • Bank posted muted interest income growth of ~4% on YoY basis , however its interest expenses declined by 2.7% owing to lower interest rate.
  • This has led to healthy growth in Net Interest Income(NII) of ~15% YoY and 5.8% QoQ.
  • Non-Interest Income has remained flat over YoY, however Net total income grew at a healthy rate of ~11% on YoY and 6% on QoQ basis.
  • As moratorium period has ended, COVID-19 related provisions have declined significantly by 87% on QoQ basis.
  • This has led to total provisions and contingencies declining by 23% and 19% on YoY and QoQ basis respectively.
  • However, the exact impact of moratorium on asset quality is still unknown and these provisions can increase going ahead.
  • Reduced provisions has led to robust growth in PBT and hence in net profit on YoY basis.
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Balance Sheet Summary

State Bank of India (SBI) Balance sheet size
  • SBI’s balance sheet has increased by 13% on YoY basis.
  • Bank has decent growth in gross advances of 6% on YoY basis , whereas there is a strong deposits growth of ~14% YoY.
State Bank of India (SBI) Borrowings and Reserves
  • Borrowings have reduced mainly due to increase in deposits and reserves have increased on YoY basis due to robust profitability.

Deposits Mix (%)

State Bank of India (SBI) Deposits Mix (%)
  • Bank’s deposits – both timed and CASA (current and savings) have shown healthy growth.
  • Bank’s current CASA and term deposit mix is 55:45

Advances Mix(%)

State Bank of India (SBI) Advances Mix (%)
  • Domestic retail personal loans have grown by ~15% YoY , however there is sluggishness in corporate and SME lending.
  • Majority (~60%) of the retail personal loans are home loans, which are secured (mortgage backed loans).
  • Overall advances mix for this quarter is as shown below:
Advances Mix (%)
  • As seen here, retail personal and agri-loans have a major share in advances mix.
  • Also from the overall 38% personal loan book , ~23% of the loan book accounts for home loans.

Asset Quality

State Bank of India (SBI) Asset Quality
  • As of Sept’20, Bank’s gross NPAs are at ~5.3% and Net NPAs at 1.6%.
  • Bank is able to reduce its NPAs over the past few quarters.
  • This has led to provision coverage ratio increasing to 88.2% in Sept’20.
  • However, the actual impact of moratorium is yet to unfold and there is a possibility of surge in NPAs in upcoming quarters.
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Key Ratios

State Bank of India (SBI) Key Ratios
  • Bank is able to increase its Net Interest Margin (NIM) despite continuously increasing cost to income ratio.
  • Bank has strong CASA ratio at 45.4% and is increasing over the past few quarters.
  • Capital Adequacy Ratio (CAR) of the bank is also strong at 14.72% as against the regulatory requirement of 9% for a PSU bank.



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