State Bank of India (SBI) is an Indian multinational public sector bank and financial services statutory body headquartered in Mumbai. SBI is the 49th largest bank in the world by total assets and ranked 221st in the Fortune Global 500 list of the world’s biggest corporations of 2020. It is a public sector bank and the largest bank in India with a 23% market share by assets and a 25% share of the total loan and deposits market. It is also the fifth largest employer in India with nearly 250,000 employees.
SBI descends from the Bank of Calcutta, founded in 1806 via the Imperial Bank of India, making it the oldest commercial bank in the Indian subcontinent. The Bank of Madras merged into the other two presidency banks in British India, the Bank of Calcutta and the Bank of Bombay, to form the Imperial Bank of India, which in turn became the State Bank of India in 1955. Overall, the bank has been formed from the merger and acquisition of nearly twenty banks over the course of its 200-year history. The Government of India took control of the Imperial Bank of India in 1955, with Reserve Bank of India (India’s central bank) taking a 60% stake, renaming it to State Bank of India.
Quarterly Growth Walkthrough
State bank of India reported an astounding 59 percent year on year (YoY) rise in net profit in the third quarter based on lower provisions and higher interest income. The country’s biggest lender reported its highest ever quarterly net profit of Rs 15,888 crore, which is a huge growth from Rs 9,948 crore in the corresponding quarter of the previous year. Net interest income (NII) has grown by 24 percent to Rs 38,068 crore in the last quarter from ₹30,687 crore in the corresponding quarter of the last year.
The bank’s loan book has grown by 17.6 percent YoY during the quarter and domestic advances have grown by 17 percent. The growth in domestic advances were supported by personal and corporate loans by giving out an 18 percent growth each. The bank’s total deposits have risen to Rs 42 lakh crore from to Rs 40 lakh crore YoY.
The bank’s asset quality has enhanced with gross non-performing assets falling to ₹98,346 crore by the close of December from ₹1.2 lakh crore during the previous year. Gross NPA as a percentage of total assets has shrunk to 3.14 percent during December quarter from 3.52 precent sequentially and 4.5 percent from the previous year.
The lender’s provisions for the quarter have declined by 17 percent YoY to Rs 5,761 crore. The provision for non-performing assets was Rs 1,586 crore compared with Rs 3,096 crore in the previous year.
SBI’s income fee has increased by 3 percent year on year to Rs 5,928 crore in the December quarter as compared to Rs 5,747 crore in the previous year. The bank’s income from investment has risen to Rs 2,938 crore in the December quarter from Rs 457 crore in the previous quarter.
Word from the Board
Dinesh Khara, the chairman of SBI said that “Credit growth is broad based. But we expect the pace to continue next year also. But some moderation may happen. We are hopeful to see good traction in infrastructure sector like roads, ports, iron and steel. We expect strong demand from consumer sector like white goods. We also see opportunity to finance aviation. Data centre, EVs and batteries are other sectors”. The management said that the bank remains well capitalised and will use the internal accruals to meet the business growth requirements.
Exposure to Adani Group
State Bank of India’s Chairman said the lender’s exposure to the Adani Group is around Rs 27,000 crore or 0.8 to 0.9 percent of its loan book. Adani Group’s repayments are on schedule which suggests that presently the bank faces no agitation.
Dinesh Khara said that “We have not extended any loan against shares. The stock price will not impact our loans. As I mentioned, it is all against assets that are cash generating and have an excellent track record in repayments. We have not started any special engagement with the group yet. For the time being there is no concern”.
Technical Analysis
SBIN stock price has taken a strong support at its 23.6% retracement level. However, the stock faces stiff resistance at the price around Rs 600. Considering the weekly MFI at 20 points, the stock is incredibly oversold for the mid-term. We may see the price making a break over the Rs 600 level in the coming months as the bank is putting out a consistent and healthy growth.
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