InvestorQ : Did you find the SBI numbers attractive for the Dec-20 quarter and why has the stock rallied so much?
Sam Eswaran made post

Did you find the SBI numbers attractive for the Dec-20 quarter and why has the stock rallied so much?

Moii Chavate answered.
1 year ago

In the midst of all the result driven action, the big bellwether of PSU banks has always been SBI. The results did not really disappoint although the expectation was quite tepid and that helped the cause of SBI as the expectations were quite low to begin with. On this benchmark it must be said that SBI performance was actually commendable.

For the quarter ending Dec-20, SBI actually reported a small fall in net profit by 4.2% at Rs.6,258 crore. However, this has less to do with operating metrics and more to with the higher amount of provisioning set aside. For example, as we shall see later, the loan loss provisions actually spiked by 40% on a yoy basis impacting the bottom line sharply.

On the top line front, the SBI revenues were virtually flat with a growth of just about a marginal 1.88% at Rs.97,182 crore. Like most of the other banks, SBI also reported spike in treasury revenues. However, SBI reported flat revenues in retail banking and a fall in revenues from corporate banking. This has bene the broad trend across.

Operating margin contracted from 21.15% to 19.98% in Dec-20 quarter. This pressure on operations came from the pressure of rising costs that the bank has been facing and revenues not being able to keep pace with the same. The fall in the profit after tax or PAT was on largely on account of the additional provisions for loan losses spiking by a whopping 40% to Rs.10,800 crore.

There has been some good news on the asset quality front. The Gross NPAs at 4.77% marks a sharp fall from the previous levels. However, SBI is not expecting a big change even if we were to factor in pressures from the outcome of pandemic moratorium. Meanwhile the net NPAs at 1.23% were also sharply lower and hint at a good deal of stress in the system being already provided for. The one big risk for the bank could be the levels of Capital adequacy at just about 14.5% which could seriously restrict loan book build-up for the bank.