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

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.

SBI Quarterly Performance Review

State Bank of India Q2FY21 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.

Balance Sheet Summary

• 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.

• Borrowings have reduced mainly due to increase in deposits and reserves have increased on YoY basis due to robust profitability.

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(%)

• 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:

• 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

• 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.

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.