On Saturday 5th February 2022, the largest bank of India State Bank of India announced its quarterly results for Q3FY22. Bank has reported its highest quarterly net profit of Rs. 8,432 Cr. in Q3FY22 on account of lower provisions. How did the bank perform on the other parameters, let’s discuss in this 5-point detailed analysis article as we move ahead?
5-Point Detailed Analysis
1) Q3FY22 Result
SBI- Q3FY22 Result:
- The interest income of the bank for Q3FY22 stood at Rs. 69,678 Cr. up by 4.4% YoY and 0.3% QoQ from Rs. 66,734 Cr. and Rs. 69,481 Cr. in Q3FY21 and Q2FY22 respectively.
- The Interest expenditure of the company has also increased by 2.8% YoY and 1.8% QoQ to Rs. 38,991 Cr.
- The larger growth in the Interest Income and nominal growth in interest expenditure has led to the rise of Net Interest Income (NII) of the bank by 6.5% YoY to Rs. 30,687 Cr. in Q3FY22 from Rs. 28,820 Cr. in Q3FY21. Sequentially, this figure has gone down by 1.6% from Rs. 31,184 Cr. in the Q2FY22.
- The Non-Interest Income of the bank has decreased by 6.2% YoY from Rs. 9,246 Cr. in Q3FY21 to Rs. 8,673 Cr. in Q3FY22. Quarter on Quarter the Non-Interest Income has grown by 6% from Rs 8,208 Cr. in Q2FY22.
- The total income of the bank stands at Rs. 39,361 Cr. as of 31st December 2021 up by 3.4% YoY.
- The Operating Expenses of the bank have remained flat YoY and have gone down by 2% QoQ to Rs. 20,839 Cr. in Q3FY22.
- The Pre-Provisioning Operating Profit (PPOP) of the bank has gone up by 7% YoY from Rs. 17,333 Cr. in the quarter ended 31st December 2020 to Rs. 18,522 Cr. in the quarter ended 31st December 2021. Sequentially, the PPOP of the bank has increased by 2.5% from Rs. 18,079 Cr.
- Bank made provisions of Rs. 10,090 Cr. in the third quarter of the Financial Year 2022 which has gone down by 17% YoY from Rs. 12,137 Cr. in the same quarter of the previous financial year. Provisions were Rs. 3,034 Cr. in the quarter ended 30th September 2021 which has now increased by 3.3%.
- Lastly, the bank reported a Net Profit of Rs. 8,432 Cr. in the quarter ended 31st December 2021 which has gone up by 62.3% YoY and 10.6% QoQ.
2) Balance Sheet Summary:
SBI- Balance Sheet
- Balance sheet size grew by 11% YoY to Rs. 48.22 Lakh Cr. This growth was mainly driven by Stable Credit growth (8.5%) & Rise in Deposit base (9% YoY)
- Credit to Deposit Ratio is at much lower range (<70%) vs Private Banks (80-90%)
- Enough Liquidity Support: Lower Credit to Deposit Ratio offers sufficient liquidity and headroom to fund likely credit growth in coming quarters.
- Borrowings of the bank have increased by 22% YoY and 19% QoQ to Rs. 4.99 Lakh Cr. which was Rs. 4.10 Lakh Cr. and Rs. 4.18 Lakh Cr. in Q3FY21 and Q2FY22 respectively.
- Reserves and Surplus has also grown by 10% YoY and 3% QoQ.
3) Deposit & Advance Mix
i) Deposit Mix:
- The total deposit of the bank stands at Rs. 38.47 Lakh Cr. as of 31st December 2021 which has increased by 8.8% YoY and 1% QoQ.
- Here the Domestic Term Deposits stand at Rs. 20.17 Cr. in Q3FY22 growing by 7.4% YoY and 2% QoQ. While the Domestic CASA deposits have grown 10% YoY and de-grown 0.3% QoQ to Rs. 17.01 Lakh Cr.
- In the Deposit Mix, CASA Deposit accounts for 54.3% and Term Deposits accounts for 45.7% of the total deposit mix.
ii) Advance Mix:
- The Advances value stands at Rs. 22.64 Lakh Cr. as of December 2021 increasing by 6.5% YoY and 5% QoQ.
- In the Advance Mix, the Retail Personal Loan accounts the most i.e., 42%, and value for Rs. 9.52 Lakh Cr. as of December 2021. Next to Personal Loan is Domestic Corporate Loan which stands at 34.6% and values for Rs. 7.83 Lakh Cr. in the quarter ended 31st December 2021.
- Agri and Small & Medium Enterprise (SME) contribute 9.8% and 13.6% respectively to the Advance Mix of the Bank as of Q3FY22.
- In the Home Loans segment, SBI is having the dominant market share of 35.62% as of December 2021 which was 34.6% in the same period of the previous financial year.
- Whereas in the Auto Loans segment too, the bank is having a good share of around 28.02%, but it has reported a fall of around 3.4% YoY from 32.72% in December 2020.
4) Key Ratios:
- The Net Interest Margin (NIM) of the bank is at 3.40% as of December 2021, it was 3.50% in September 2021. But Overall, this figure looks good from the figures of March and June 2021.
- Cost to Income ratio has come down to 52.9% in Q3FY22 with improving efficiency. The Cost to Income Ratio was 54.5% in December 2020.
- The CASA ratio stood at 45.7% which is quite positive.
- The Capital Adequacy Ratio of the bank has taken a jump to 14.2% in December 2021 on account of rising profits.
5) Asset Quality
- The Gross Non-Performing Asset (NPA) is continuously on a downward trend. The Gross NPA of the bank was 5.44% in December 2021 which has now come down to 4.50% in December 2021.
- The Net NPA is also following a similar trend of Gross NPA and it stands at 1.34% in December 2021.
- The Provision Coverage Ration (PCR) is also quite strong at 88.32%.
- The slippages amount has also gone down significantly to Rs. 2,334 Cr. in the December Quarter of FY22.
i) Segment Wise Asset Quality
- In terms of Retail and Corporate, Corporate Loans accounts the most towards NPA which is around 7.09% as of December 2021 and Retail Loans NPA stand at 4.18%.
- In Retail Loans, Agri Loans account the most for bad loans which are 14.4%. SME and Personal Loans NPAs stand at 7% and 0.89% as of December 2021.
Valuations- SBI & Peers
- The Current PE Ratio of SBI Stock is 16.51 which is trading a slight premium over its historical Median PE range of 12-15.
- Among the other PSU banks, SBI has the highest PE ratio of 16.5 while other PSU banks like Bank of Baroda, Canara Bank, Punjab National Bank are having a PE ratio of 14.5, 8.8, and 10.8 respectively.
- Likely SBI has the highest Price to Book Ratio (PB Ratio) of 1.76. PB Ratios of other banks are Bank of Baroda- 0.68, Canara Bank- 0.76, Punjab National Bank- 0.50, and Indian Overseas Bank- 2.01.
What Should Shareholders Do?
State Bank of India has posted a quite strong result. The bank has registered its highest quarterly net profit of Rs.8,432 Cr in Q3FY22, representing a surge of 62% YoY. The bank reported a robust operating performance in a challenging environment. Strong Deposit growth at a high base even at declining interest rates, healthy recovery in the Retail loans portfolio, Rising Net Interest Margin, improved Asset quality, declined provisions YoY are the key drivers for profitability.
Disclaimer: The information here is provided for reference purposes only and should not be misconstrued as investment advice. Under no circumstances does this information represent are commendation to buy or sell stocks or MF.