State Bank of India : SBI sees healthy growth in retail loans despite net drop

The country's largest lender SBI's results in the quarter to December 2013 were broadly in line with estimates. Lower net income growth and increase in stressed assets led to a 34 per cent drop in net profits this quarter.

SBI's loan book this December 2013 quarter grew 16.5 per cent y-o-y, which is marginally higher than the industry average during the same period. This has been possible due to a healthy growth in retail loans.

Home and auto loans which constitute a large chunk of retail loans grew 26 per cent and 22 per cent respectively this quarter. Given the focus on retail loans, yields have been lower. Its net interest income or NII as a result, grew by just 13 per cent year-on-year.

On the deposits front, RBI allowing banks to swap foreign currency non-resident (FCNR) dollar funds helped SBI boost its deposits by 16.7 per cent. One concern for the bank has been the declining proportion of Current Account and Savings Account or CASA deposits.

The CASA deposits as a percentage of total deposits dropped from 45.54 per cent at the end of December 2012 to 43.89 per cent now while at the end of December 2011 it was 47.52 per cent.

On the asset quality front, the bank showed hardly a surprise this December quarter. Its Gross Non-Performing Assets (GNPA) increased nine basis points 5.73 per cent on a quarter on quarter basis. However, due to lower provisions, its Net NPA grew at a higher rate. Its Net NPA increased by 33 basis points to 3.34 per cent over the previous quarter. However, a marginal increase in restructured accounts is a comforting factor.

ts standard restructured assets grew by Rs 244 crore toRs 39,404 crore. Overall, its total stressed assets as a percentage of total assets stood at 6.47 per cent, which is still a matter of concern.

At the current market price, the stock is trading at a Price-to-Book Value or P/BV of 1, which is slightly higher compared to large-sized public sector banks. Although the bank has similar asset quality issues, a healthy capital adequacy ratio makes it stand out amongst its peers.

After the recent Qualified Institutional Placement , its capital adequacy stands at 13.27 per cent. This allays investors' concern of any significant dilution going forward.