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Please refer to important disclosures at the end of this report 1

Particulars (` cr) 1QFY13 4QFY12 % chg (qoq) 1QFY12 % chg (yoy)

NII 11,119 11,704 (5.0) 9,700 14.6

Pre-prov. profit* 8,177 9,597 (14.8) 7,242 12.9

PAT 3,752 4,050 (7.4) 1,584 136.9 Source: Company, Angel Research;

During 1QFY2013, State Bank of India (SBI) reported a standalone net profit of `3,752cr as against `1,584cr in 1QFY2012, which was in line with our estimates. The operating income growth was however lower than our expectations. A sharp surge in gross and net NPAs (up by 18.9% qoq and 28.5% qoq respectively) was the key negative.

Slippages surge up significantly: During 1QFY2013, the bank’s advances grew by 18.9% yoy, while deposits were up by 16.1% yoy. Domestic saving deposits growth was moderate at 13.4% yoy while current account deposits declined by 2.9% yoy. The domestic NIM of the bank was lower by 42bp qoq on account of interest rate reversals, lower lending rates (SME and agri rates lowered by 50-350bp effective June 01, 2012), and higher cost of deposits during the quarter (up 29bp qoq to 6.2%). The performance on the fee income front was muted with other income excluding treasury declining by 2.6% yoy. The growth in CEB income was flat yoy, while dividend income was lower at `18cr compared to `228cr in 1QFY2012 (interim dividend from subsidiaries not taken this year). On the asset-quality front, the bank’s annualized slippage ratio for the quarter surged sharply to 5.0%, significantly higher than 2.3% witnessed in 4QFY2012. The gross and net NPA ratio rose upwards by 18.9% and 28.5% qoq respectively. The PCR of the bank declined by 381bp qoq to 64.3%.

Outlook and valuation: The asset quality of the bank has been witnessing pressure for quite some time now and with the slowdown in economic growth and persistent inflation levels pointing towards further economic stress, cyclically, the next six to nine months are likely to be challenging for the bank. However, at the current market price, the stock is trading at 1.2x FY2014E ABV (adjusting for value of subsidiaries 1.0x FY2014E ABV) vis-à-vis its historic range of 1.3–2.3x and median of 1.6x. Also, considering the bank’s dominant position and reach, high fee income and superior earnings quality, we feel the stock is a value buy from a 18-24 month perspective. Hence, we recommend a Buy on the stock with a target price of `2,270, though the returns are likely to be back-ended in nature. Moreover, from a value buying perspective some of SBI’s peer PSU large banks are trading at relatively cheaper valuations.

Key financials (standalone) Y/E March (` cr) FY2011 FY2012 FY2013E FY2014E

NII 32,526 43,291 47,921 56,737

% chg 37.4 33.1 10.7 18.4

Net profit 8,265 11,707 15,056 17,361

% chg (9.8) 41.7 28.6 15.3

NIM (%) 3.0 3.6 3.5 3.5

EPS (`) 130.1 174.5 224.4 258.7

P/E (x) 14.5 10.8 8.4 7.3

P/ABV (x) 2.0 1.6 1.4 1.2

RoA (%) 0.7 0.9 1.0 1.0

RoE (%) 13.3 16.5 17.6 17.8

BUY CMP `1,888 Target Price `2,270

Investment Period 12 Months Stock Info

Sector Banking

Market Cap (` cr) 126,690

Beta 1.2

52 Week High / Low 2475/1576

Avg. Daily Volume 683,937

Face Value (`) 10

BSE Sensex 17,558

Nifty 5,320

Reuters Code SBI.BO

Bloomberg Code SBIN@IN

Shareholding Pattern (%)

Promoters

61.6

MF / Banks / Indian Fls 17.3

FII / NRIs / OCBs 8.7

Indian Public / Others 12.5

Abs. (%) 3m 1yr 3yr

Sensex 6.9 2.5 17.0

SBI 2.4 (16.9) 10.3

Vaibhav Agrawal 022 – 3935 7800 Ext: 6808

[email protected]

Varun Varma 022 – 3935 7800 Ext: 6847

[email protected]

Sourabh Taparia 022 – 3935 7800 Ext: 6872

[email protected]

State Bank of India Performance Highlights

1QFY2013 Result Update | Banking

August 10, 2012

State Bank of India | 1QFY2013 Result Update

August 10, 2012 2

Exhibit 1: 1QFY2013 performance (standalone)

Particulars (` cr) 1QFY13 4QFY12 % chg (qoq) 1QFY12 % chg (yoy) FY2012 FY2011 % chg

Interest earned 28,917 28,696 0.8 24,197 19.5 106,521 81,394 30.9

- on Advances / Bills 22,135 22,141 (0.0) 18,256 21.2 81,078 59,976 35.2

- on investments 6,373 6,205 2.7 5,414 17.7 23,885 19,651 21.5

- on balance with RBI & others 151 102 48.9 166 (9.0) 414 411 0.9

- on others 258 248 3.9 361 (28.6) 1,144 1,356 (15.6)

Interest Expended 17,798 16,992 4.7 14,498 22.8 63,230 48,868 29.4

Net Interest Income 11,119 11,704 (5.0) 9,700 14.6 43,291 32,526 33.1

Other income 3,499 5,264 (33.5) 3,534 (1.0) 15,221 15,825 (3.8)

Other income excl. treasury 3,278 5,290 (38.0) 3,365 (2.6) 15,271 14,904 2.5

- Fee Income 2,603 4,216 (38.3) 2,633 (1.2) 12,091 11,563 4.6

- Treasury Income* 221 (26) (950.0) 169 30.8 (49) 921 NA

- Forex Income 457 335 36.3 331 38.0 1,432 1,464 (2.2)

- Others 218 739 (70.4) 401 (45.5) 1,748 1,876 (6.9)

Operating income 14,618 16,968 (13.9) 13,234 10.5 58,512 48,351 21.0

Operating expenses 6,441 7,371 (12.6) 5,991 7.5 26,069 23,015 13.3

- Employee expenses 4,137 5,431 (23.8) 3,717 11.3 16,974 14,480 17.2

- Other Opex 2,304 1,940 18.8 2,274 1.3 9,095 8,535 6.6

Pre-provision Profit 8,177 9,597 (14.8) 7,242 12.9 32,443 25,336 28.1

Provisions & Contingencies 2,456 3,140 (21.8) 4,157 (40.9) 13,960 10,381 34.5

- Provisions for NPAs 2,790 2,837 (1.6) 2,782 0.3 11,546 8,792 31.3

- Provisions for Investments (521) 27 NA 1,048 NA 1,533 647 137.1

- Provisions for Std. Assets 169 375 (54.9) 288 (41.2) 979 977 0.2

- Other Provisions 17 (98) NA 39 NA) (98) (34) NA

PBT 5,720 6,456 (11.4) 3,086 85.4 18,483 14,954 23.6

Provision for Tax 1,969 2,406 (18.2) 1,502 31.1 6,776 6,690 1.3

PAT 3,752 4,050 (7.4) 1,584 136.9 11,707 8,264 41.7

Effective Tax Rate (%) 34.4 37.3 (285)bp 48.7 (1426)bp 36.7 44.7 (807)bp

Source: Company, Angel Research;

Exhibit 2: 1QFY2013 Actual vs Angel estimates

Particulars (` cr) Actual Estimates Var (%)

Net interest income 11,119 11,959 (7.0)

Non-interest income 3,499 3,921 (10.8)

Operating income 14,618 15,880 (8.0)

Operating expenses 6,441 6,763 (4.8)

Pre-prov. profit 8,177 9,117 (10.3)

Provisions & cont. 2,456 3,731 (34.2)

PBT 5,720 5,386 6.2

Prov. for taxes 1,969 1,747 12.7

PAT 3,752 3,638 3.1

Source: Company, Angel Research


August 10, 2012 3

Exhibit 3: 1QFY2013 performance analysis (standalone)

Particulars 1QFY13 4QFY12 % chg (qoq) 1QFY12 % chg (yoy)

Advances (` cr) 916,841 867,579 5.7 770,891 18.9

Deposits (` cr) 1,102,926 1,043,647 5.7 950,072 16.1

Credit-to-Deposit Ratio (%) 83.1 83.1 (0)bp 81.1 199bp

Current deposits (` cr) 83,485 98,273 (15.0) 85,971 (2.9)

Saving deposits (` cr) 390,410 359,847 8.5 344,387 13.4

CASA deposits (` cr) 473,895 458,120 3.4 430,358 10.1

Reported dom. CASA ratio (%) 46.1 46.6 (46)bp 47.9 (175)bp

CAR (%) 13.2 13.9 (69)bp 11.6 157bp

Tier 1 CAR (%) 9.4 9.8 (41)bp 7.6 178bp

Profitability Ratios (%) Cost of deposits 6.2 6.0 29bp 5.7 58bp

Yield on advances 10.9 11.1 (19)bp 10.4 43bp

Reported NIM (global) 3.6 3.9 (32)bp 3.6 (5)bp

Cost-to-income ratio 44.1 43.4 62bp 45.3 (121)bp

Asset quality Gross NPAs (` cr) 47,156 39,676 18.9 27,768 69.8

Gross NPAs (%) 5.0 4.4 55bp 3.5 147bp

Net NPAs (` cr) 20,324 15,819 28.5 12,435 63.4

Net NPAs (%) 2.2 1.8 40bp 1.6 61bp

Provision Coverage Ratio (%) 64.3 68.1 (381)bp 67.3 (296)bp

Slippage ratio (%) 5.0 2.3 268bp 3.3 173bp

Credit cost (%) 0.8 0.9 (3)bp 0.9 (7)bp


Loan book growth healthy

During 1QFY2013, the bank’s advances grew by 18.9% yoy, driven by a healthy 48.4% yoy growth in its international loan book (~19% in dollar terms), 25.9% yoy growth in agricultural advances and 24.0% yoy growth in large corporate loans. The growth in retail advances was however lower at 12.8% yoy on account of relatively slower y-o-y growth in home loans (13.0%) and education loans (11.0%) as compared to healthy growth of 22.5% in auto loans.

The bank’s loan book continues to remain well diversified, with no segment accounting for more than 20% of the total loan book.

Overall, deposits accretion remained reasonably healthy during 1QFY2013, registering a growth of 16.1% yoy. The domestic saving deposits growth was moderate at 13.4% yoy which coupled with a 2.9% yoy decline in volatile domestic current account deposits led to domestic CASA deposits growing at a modest pace of 10.1% yoy. The reported domestic CASA ratio as of 1QFY2013 stood at 46.1% (46.6% in 4QFY2012 and 47.9% in 1QFY2012).


August 10, 2012 4

Exhibit 4: Healthy credit and deposit growth


Exhibit 5: CASA ratio declines


Exhibit 6: Segment-wise advances growth

Segment (%)

Large corporate 24.0

Mid-corporate 6.3

SME 9.0

Agri 25.9

International 48.4

Home 13.0

Auto 22.5

Education 11.0

Overall advances (gross) 20.0


Exhibit 7: Loan book remains well-diversified


Overall NIMs dip by 32bp sequentially

The bank’s NIM decreased for domestic operation (down by 42bp qoq to 3.9%), while it increased for foreign operations (up by 24bp qoq to 1.77%). The overall NIM of the bank contracted by 32bp during the quarter to 3.6%. The domestic NIM was lower on account of interest rate reversals, lower lending rates (SME and agri rates lowered by 50-350bp effective June 01, 2012), lower demand (seasonality effect) for short term working capital loans (substituted into lower yielding CPs) and higher cost of deposits during the quarter (up 29bp qoq to 6.2%).

The bank recently reduced its retail lending rates (home and auto loans) for new customers. The retail segment is currently exhibiting higher risk-adjusted returns (as experienced by private banks) and hence in our view it makes sense for SBI to try and gain market share (will be ROA accretive for the bank) in this segment by taking advantage of amongst lowest cost of funds in industry.

19

.8

18

.0

16

.1

16

.5

14

.7

18

.9

16

.1

16

.5

13

.8

13

.9

11

.7

16

.1

81.0 81.1 81.2

84.5 83.1 83.1

76.0

80.0

84.0

88.0

-

5.0

10.0

15.0

20.0

25.0

4QFY11 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13

Advances YoY growth (%) Deposits YoY growth (%)

47

.9

47

.8

47

.9

46

.6

46

.1

18.8

6.4

12.0

6.4

10.1

-

7.0

14.0

21.0

30.0

34.0

38.0

42.0

46.0

50.0

1QFY12 2QFY12 3QFY12 4QFY12 1QFY13

Reported domestic CASA ratio (%) CASA yoy growth (%, RHS)

International15%

Mid-Corporate

18%

Large Corporate

15%SME14%

Agricultural13%

Retail20%

Others3%


August 10, 2012 5

Exhibit 8: Overall reported NIM dips by 32bp qoq...


Exhibit 9: ...partly on sequentially lower domestic YoA


Fee income remains muted on a y-o-y basis

The performance on the fee income front was muted with other income excluding treasury declining by 2.6% yoy. The growth in CEB income was flat y-o-y, while dividend income was lower at `18cr compared to `228cr in 1QFY2012 (interim dividend from subsidiaries not taken this year). Forex income however remained strong, growing by 38.0% yoy during 1QFY2013.

According to the management, the bank has reduced its fee charges on loan processing, bank transactions and guarantees and has completely waived off charges on transactions within the bank (as per industry standard) and minimum balances on savings account leading to lower fee income.

Exhibit 10: Lower dividend income from subsidiaries

Particulars (` cr) 1QFY13 4QFY12 % chg (qoq) 1QFY12 % chg (yoy)

CEB 2,603 4,216 (38.3) 2,633 (1.2)

Treasury 221 (26) NA 169 30.8

Forex 457 335 36.3 331 38.0

Dividend 18 515 (96.5) 228 (92.1)

Others 200 224 (10.5) 173 15.8

Other income 3,499 5,264 (33.5) 3,534 (1.0)

Other income excl. treasury 3,278 5,290 (38.0) 3,365 (2.6)


Slippages surprise negatively

On the asset-quality front, the bank’s annualized slippage ratio for the quarter surged sharply to 5.0%, significantly higher than 2.3% witnessed in 4QFY2012. Almost 62.1% of the slippages were witnessed in the corporate and SME segments. Amongst the corporate and SME segments’ slippages, the major industries witnessing sequentially higher slippages were trading (`848cr vs. `56cr in 1QFY2012 and `396cr for entire FY2012), infrastructure (`787cr in 1QFY2013 vs. `554cr in 4QFY2012) and engineering (`636cr vs. `112cr in 4QFY2012).

The NPA ratios deteriorated sequentially with both gross and net NPA levels increasing on an absolute basis by 18.9% and 28.5% qoq respectively. As of 1QFY2013 the gross NPA ratio stands at 5.0% (4.4% in 4QFY2012), while the net NPA ratio stands at 2.2% (1.8% in 4QFY2012). The provisioning coverage

3.62 3.79

4.05 3.89

3.57

2.00

2.50

3.00

3.50

4.00


(%)

10.43 10.78 10.93 11.05

10.86

8.0

8.5

9.0

9.5

10.0

10.5

11.0

11.5


(%)


August 10, 2012 6

ratio (incl. technical write-offs) also deteriorated by 381bp during 1QFY2013 to 64.3%. The bank restructured accounts worth `564cr, taking the total outstanding restructured book to `36,904cr (4.0% of global advances and 4.7% of domestic advances). The restructured portfolio of the associate banks stands at ~`15,000cr of which `1,200cr has slipped into NPA.

Exhibit 11: Slippages spike up in 1QFY2013


Exhibit 12: NPA ratios deteriorate significantly


Exhibit 13: Break-up of provisioning expenses Particulars (` cr) 1QFY13 4QFY12 % chg (qoq) 1QFY12 % chg (yoy)

NPA 2,790 2,837 (1.6) 2,782 0.3

Standard assets 169 375 (54.9) 288 (41.2)

Investments (521) 27 NA 1,048 NA

Others 17 (98) NA 39 (55.2)

Total Provisions 2,456 3,140 (21.8) 4,157 (40.9)


Cost ratios remained at normalized levels

During the quarter, staff expenses increased by 11.3% yoy to `4,137cr, while other opex increased by 1.3% yoy to `2,304cr. The bank has transferred its employee fund (~`17,000cr) to an external trust which should lead to lower contribution for employees of the bank going forward.

The bank added 30 branches during the quarter to bolster its already strong branch network to 14,127 branches.

3.3 4.2 4.3 2.3 5.0

0.9 0.9 0.9

0.9 0.8

0.4

0.6

0.8

1.0

-

1.0

2.0

3.0

4.0

5.0

6.0


Slippages (%) Credit cost (%, RHS)

3.5

4.2

4.6

4.4

5.0

1.6

2.0

2.2

1.8

2.2

67.3

63.5 62.5

68.1

64.3

56.0

60.0

64.0

68.0

72.0

(0.0)

0.7

1.4

2.1

2.8

3.5


Gross NPAs (%) Net NPAs (%) NPA coverage (%, RHS)


August 10, 2012 7

Exhibit 14: Opex growth trends

Particulars (` cr) 1QFY13 4QFY12 % chg (qoq) 1QFY12 % chg

(yoy)

Payment to employees 3,017 3,055 (1.3) 2,827 6.7

Contrib. for employees 805 860 (6.4) 685 17.5

Total staff expenses (A) 3,821 3,914 (2.4) 3,512 8.8

Rent, taxes and lighting 508 529 (3.8) 436 16.5

Dep. on property 266 240 10.9 244 9.1

Others 1,646 1,692 (2.7) 1,407 16.9

Other opex (B) 2,420 2,461 (1.6) 2,088 15.9

Total opex (A)+(B) 6,242 6,375 (2.1) 5,599 11.5


Exhibit 15: Cost ratios remain at normalised levels


Performance overview of subsidiaries

SBI Life reported a PAT of `163cr for 1QFY2013, (growth of 13.2% yoy). The

AUM as of 1QFY2013 stood at `47,275cr.

SBI Capital Markets registered a sharp 69.7% yoy decline in PAT to `26cr

during 1QFY2013, reflecting the poor capital market activity.

SBI Cards and Payment Services posted PAT of `10cr for 1QFY2013 which

was lower by 20.6% yoy.

SBI DFHI recorded PAT of `27cr (increased by 5 times on a y-o-y basis).

The market share of average AUM for SBI funds management increased from

6.3% as on 4QFY2012 to 6.8% in 1QFY2013. The company recorded a PAT

figure of `26cr for 1QFY2013 (growth of 36% yoy).

SBI’s associate banks recorded a net profit growth of 28.9% yoy of `948cr in

1QFY2013.

Investment arguments

Strong CASA franchise

SBI has a strong CASA franchise (45%+) on account of its huge nationwide branch network (14,127 as of 1QFY2013). As of 1QFY2013, the bank’s CASA ratio stood at 46.1%, the highest amongst all other PSU banks. Strongest fee income among PSU banks

SBI has a relatively strong share of fee income, owing to its strong corporate and government business relationships. In FY2012, the bank continued its dominance with non-interest income/assets at 1.2% (one of the highest among PSU banks).

45.3 46.0 43.8 43.4 44.1

1.9

2.1 2.0

2.2

1.9

1.7

1.8

1.9

2.0

2.1

2.2

2.3

42.0

43.0

44.0

45.0

46.0


Cost-to-income ratio (%) Opex to average assets (%, RHS)


August 10, 2012 8

Investment concerns

Asset quality woes likely to continue

Asset quality pressures for the bank are likely to continue given the decelerating growth and high inflation (expected to inch up further until December 2012 at least). With interest rates hence set to remain high, there is no visible catalyst for asset quality to improve materially in the near term.

Outlook and valuation

The asset quality of the bank has been witnessing pressure for quite some time now and with economic growth slowdown and persistent inflation levels pointing towards further economic stress, cyclically, the next six to nine months are likely to be challenging for the bank. However, at the current market price, the stock is trading at 1.2x FY2014E ABV (adjusting for value of subsidiaries 1.0x FY2014E ABV) vis-à-vis its historic range of 1.3–2.3x and median of 1.6x. Also, considering the bank’s dominant position and reach, high fee income and superior earnings quality, we feel the stock is a value buy from a 18-24 month perspective. Hence, we recommend a Buy rating on the stock with a target price of `2,270, though the returns are likely to be back-ended in nature. Moreover, from a value buying perspective some of SBI’s peer PSU large banks are trading at relatively cheaper valuations. Exhibit 16: SOTP valuation summary

Particulars Target multiple Value/share (`)

SBI 1.3x FY14E ABV 1,945

Associate Banks 0.65x-0.9x FY14E ABV 213

Life Insurance 13.0x FY14ENBP 72

Others (AMC, Cap Mkt, Factors, Cards) 40

SOTP value 2,270

Source: Angel Research

Exhibit 17: Key assumptions

Particulars (%) Earlier estimates Revised estimates

FY2013 FY2014 FY2013 FY2014

Credit growth 15.0 17.0 15.0 17.0

Deposit growth 16.0 18.0 16.0 18.0

CASA ratio 44.6 44.5 43.9 43.5

NIMs 3.6 3.6 3.5 3.5

Other income growth 24.7 14.3 15.5 16.3

Growth in staff expenses 16.0 16.0 12.0 14.0

Growth in other expenses 14.0 14.0 12.0 14.0

Slippages 3.4 3.3 4.0 3.5



August 10, 2012 9

Exhibit 18: Change in estimates

Particulars (` cr) FY2013 FY2014

Earlier estimates

Revised estimates Var. (%) Earlier

estimates Revised

estimates Var. (%)

Net interest income 49,960 47,921 (4.1) 57,864 56,737 (1.9)

Non-interest income 17,824 16,549 (7.2) 20,344 19,203 (5.6)

Operating income 67,783 64,470 (4.9) 78,208 75,940 (2.9)

Operating expenses 30,058 29,197 (2.9) 34,660 33,285 (4.0)

Pre-prov profit 37,725 35,273 (6.5) 43,548 42,655 (2.0)

Provisions & cont. 15,548 13,261 (14.7) 17,606 17,259 (2.0)

PBT 22,177 22,012 (0.7) 25,942 25,396 (2.1)

Prov. for taxes 7,009 6,956 (0.8) 8,212 8,035 (2.2)

PAT 15,168 15,056 (0.7) 17,730 17,361 (2.1)


Exhibit 19: P/ABV band


Exhibit 20: P/E band


0

1,000

2,000

3,000

4,000

5,000

Apr

-06

Nov

-06

Jun-

07

Jan-

08

Aug

-08

Mar

-09

Oct

-09

May

-10

Dec

-10

Jul-1

1

Feb-

12

Sep-

12

Price (`) 1.0x 1.5x 2.0x 2.5x 3.0x

0

1,000

2,000

3,000

4,000

5,000

Jan-

05

Aug

-05

Mar

-06

Oct

-06

May

-07

Dec

-07

Jul-

08

Feb-

09

Sep-

09

Apr

-10

Nov

-10

Jun-

11

Jan-

12

Aug

-12

Price (`) 9x 12x 15x 18x


August 10, 2012 10

Exhibit 21: Premium/Discount to Sensex


Exhibit 22: Angel EPS forecast vs. consensus

Year Angel forecast Bloomberg consensus Var (%)

FY2013E 224.4 213.7 5.0

FY2014E 258.7 259.5 (0.3)

Source: Bloomberg, Angel Research

(70)(60)(50)(40)(30)(20)(10)

0 10 20

Apr

-06

Sep-

06

Feb-

07

Jul-

07

Dec

-07

May

-08

Oct

-08

Mar

-09

Aug

-09

Jan-

10

Jun-

10

Nov

-10

Apr

-11

Sep-

11

Feb-

12

Jul-

12

Discount to Sensex Avg. Historical Discount


August 10, 2012 11

Exhibit 23: Recommendation summary

Company Reco. CMP (`)

Tgt. price (`)

Upside (%)

FY2014E P/ABV (x)

FY2014E Tgt. P/ABV (x)

FY2014E P/E (x)

FY2012-14E EPS CAGR (%)

FY2014E RoA (%)

FY2014E RoE (%)

AxisBk Buy 1,071 1,373 28 1.4 1.9 7.5 18.1 1.6 20.8

FedBk Accumulate 423 458 8 1.0 1.1 7.3 12.1 1.3 14.7

HDFCBk Neutral 602 - - 3.4 - 16.7 27.9 1.8 22.0

ICICIBk* Buy 955 1,169 22 1.5 1.9 11.6 20.9 1.4 15.5

SIB Buy 23 27 16 0.9 1.1 5.4 9.0 0.9 18.5

YesBk Buy 357 453 27 1.8 2.3 8.4 24.2 1.5 23.8

AllBk Neutral 127 - - 0.5 - 3.1 4.6 0.9 17.0

AndhBk Neutral 96 - - 0.6 - 3.9 0.9 0.9 15.3

BOB Buy 628 829 32 0.7 1.0 4.3 10.1 1.0 18.0

BOI Buy 272 323 19 0.7 0.8 3.8 23.5 0.8 17.0

BOM Neutral 46 - - 0.6 - 4.0 35.6 0.6 15.5

CanBk Buy 349 421 20 0.6 0.8 4.1 7.2 0.8 15.3

CentBk Neutral 70 - - 0.6 - 3.2 103.6 0.6 15.1

CorpBk Accumulate 389 436 12 0.5 0.6 3.5 2.1 0.8 16.3

DenaBk Buy 88 107 21 0.5 0.7 3.5 5.1 0.8 16.4

IDBI# Buy 84 101 20 0.5 0.6 3.6 21.2 0.9 14.7

IndBk Accumulate 172 190 11 0.6 0.7 3.8 6.4 1.1 17.4

IOB Accumulate 71 80 12 0.4 0.5 3.2 31.0 0.6 14.4

J&KBk Accumulate 924 1,026 11 0.8 0.9 4.8 7.6 1.3 18.0

OBC Buy 226 278 23 0.5 0.6 3.5 29.0 0.9 14.3

PNB Buy 724 950 31 0.7 1.0 4.2 9.9 1.0 18.0

SBI* Buy 1,888 2,270 20 1.2 1.4 7.3 21.8 1.0 17.8

SynBk Buy 94 119 26 0.5 0.7 3.2 15.7 0.8 17.8

UcoBk Neutral 68 - - 0.7 - 3.8 11.7 0.6 15.3

UnionBk Buy 164 230 41 0.6 0.8 3.3 23.6 0.8 17.1

UtdBk Buy 53 79 47 0.4 0.6 2.3 23.2 0.8 16.7

VijBk Neutral 53 - - 0.6 - 4.5 13.0 0.5 13.3

Source: Company, Angel Research; Note:*Target multiples=SOTP Target Price/ABV (including subsidiaries), #Without adjusting for SASF

Company Background

State Bank of India is the largest bank in India, with an asset size of ~ over `12lakh cr. The bank has the widest network of ~14,000 branches, with dominant presence across all regions of the country, with two-thirds of its branches in rural and semi-urban areas (in comparison, the second largest PSU bank has ~5,700 branches and the largest private sector bank has ~2,750 branches). The bank also has 173 overseas branches, which account for ~17% of its total loans. It has subsidiaries in life insurance, asset management, credit cards and capital markets, among others; and five regional subsidiary banks (having ~5,200 branches and combined asset size of ~`4.3lakh cr).


August 10, 2012 12

Income statement (standalone) Y/E March (` cr) FY09 FY10 FY11 FY12 FY13E FY14E

Net Interest Income 20,873 23,671 32,526 43,291 47,921 56,737

- YoY Growth (%) 22.6 13.4 37.4 33.1 10.7 18.4

Other Income 12,691 14,968 15,825 14,351 16,549 19,203

- YoY Growth (%) 35.0 17.9 5.7 (9.3) 15.3 16.0

Operating Income 33,565 38,640 48,351 57,643 64,470 75,940

- YoY Growth (%) 27.0 15.1 25.1 19.2 11.8 17.8

Operating Expenses 15,649 20,319 23,015 26,069 29,197 33,285

- YoY Growth (%) 24.1 29.8 13.3 13.3 12.0 14.0

Pre - Provision Profit 17,916 18,321 25,336 31,574 35,273 42,655

- YoY Growth (%) 29.7 2.3 38.3 24.6 11.7 20.9

Prov. & Cont. 3,736 4,396 10,385 13,090 13,261 17,259

- YoY Growth (%) 10.8 17.7 136.2 26.1 1.3 30.2

Profit Before Tax 14,180 13,925 14,951 18,483 22,012 25,396

- YoY Growth (%) 35.8 (1.8) 7.4 23.6 19.1 15.4

Prov. for Taxation 5,058 4,759 6,686 6,776 6,956 8,035

- as a % of PBT 35.7 34.2 44.7 36.7 31.6 31.6

PAT 9,121 9,166 8,265 11,707 15,056 17,361

- YoY Growth (%) 35.5 0.5 (9.8) 41.7 28.6 15.3

Balance sheet (standalone) Y/E March (` cr) FY09 FY10 FY11 FY12 FY13E FY14E

Share Capital 635 635 635 671 671 671

Reserves & Surplus 57,313 65,314 64,351 83,280 95,478 109,468

Deposits 742,073 804,116 933,933 1,043,647 1,210,631 1,428,545

- Growth (%) 38.1 8.4 16.1 11.7 16.0 18.0

Borrowings 53,714 71,031 79,945 86,989 100,779 118,693

Tier 2 Capital 30,344 31,980 39,624 40,016 46,019 53,842

Other Liab & Prov. 80,353 80,337 105,248 80,915 93,815 111,325

Total Liabilities 964,432 1,053,414 1,223,736 1,335,519 1,547,393 1,822,544

Cash balances 55,546 61,291 94,396 54,076 48,425 57,142

Bank balances 48,858 24,898 28,479 43,087 49,918 58,791

Investments 275,954 295,785 295,601 312,198 383,658 459,589

Advances 542,503 631,914 756,719 867,579 997,716 1,167,327

- Growth (%) 30.2 16.5 19.8 14.7 15.0 17.0

Fixed Assets 3,838 4,413 4,764 5,467 6,143 7,018

Other Assets 37,733 35,113 43,778 53,113 61,533 72,470

Total Assets 964,432 1,053,414 1,223,736 1,335,519 1,547,393 1,822,337

- Growth (%) 33.8 9.2 16.2 9.1 15.9 17.8


August 10, 2012 13

Ratio analysis (standalone) Y/E March FY09 FY10 FY11 FY12 FY13E FY14E

Profitability Ratios (%) NIMs 2.6 2.5 3.0 3.6 3.5 3.5

Cost to Income Ratio 46.6 52.6 47.6 45.2 45.3 43.8

RoA 1.1 0.9 0.7 0.9 1.0 1.0

RoE 18.2 15.7 13.3 16.5 17.6 17.8

B/S ratios (%) CASA Ratio 41.6 47.3 49.4 44.8 43.9 43.5

Credit/Deposit Ratio 73.1 78.6 81.0 83.1 82.4 81.7

CAR 14.3 13.4 12.0 13.9 13.8 13.6

- Tier I 9.4 9.5 7.8 9.8 9.6 9.3

Asset Quality (%) Gross NPAs 2.9 3.0 3.3 4.5 5.9 6.6

Net NPAs 1.8 1.7 1.6 1.8 2.5 2.3

Slippages 2.6 2.2 2.8 3.2 4.0 3.5

Loan Loss Prov./Avg. Assets 0.3 0.5 0.7 0.9 0.9 1.0

Provision Coverage 39.2 59.2 65.0 68.1 65.5 70.0

Per Share Data (`) EPS 143.7 144.4 130.1 174.5 224.4 258.7

ABVPS 824.2 972.5 967.7 1,200.1 1,332.0 1,574.6

DPS 29.0 30.0 30.0 35.0 42.5 49.5

Valuation Ratios PER (x) 13.1 13.1 14.5 10.8 8.4 7.3

P/ABVPS (x) 2.3 1.9 2.0 1.6 1.4 1.2

Dividend Yield 1.5 1.6 1.6 1.9 2.3 2.6

DuPont Analysis (%) NII 2.5 2.4 2.9 3.4 3.3 3.4

(-) Prov. Exp. 0.4 0.4 0.9 1.0 0.9 1.0

Adj. NII 2.0 1.9 2.0 2.4 2.4 2.4

Treasury 0.3 0.2 0.1 (0.1) 0.0 0.0

Int. Sens. Inc. 2.4 2.1 2.0 2.3 2.4 2.4

Other Inc. 1.2 1.3 1.3 1.2 1.1 1.1

Op. Inc. 3.5 3.4 3.3 3.5 3.5 3.5

Opex 1.9 2.0 2.0 2.0 2.0 2.0

PBT 1.7 1.4 1.3 1.4 1.5 1.5

Taxes 0.6 0.5 0.6 0.5 0.5 0.5

RoA 1.1 0.9 0.7 0.9 1.0 1.0

Leverage (x) 17.2 17.7 19.1 18.8 17.4 17.8

RoE 18.2 15.7 13.3 16.5 17.6 17.8


August 10, 2012 14

Research Team Tel: 022 - 39357800 E-mail: [email protected] Website: www.angelbroking.com DISCLAIMER

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Disclosure of Interest Statement State Bank of India

1. Analyst ownership of the stock No 2. Angel and its Group companies ownership of the stock No 3. Angel and its Group companies' Directors ownership of the stock No 4. Broking relationship with company covered No

Ratings (Returns): Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%) Reduce (-5% to 15%) Sell (< -15%)

Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors

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