SBI disappoints with Q2 FY12 results

State Bank of India (SBI) disappointed the street with its results declaration. On a half yearly basis, the bank’s Net Profits declined by 18.86% to Rs 4394 cr. This was on the back of an increase in provisions by 46% to Rs 5703 cr. Today, the scrip closed down by 7% to Rs 1862.50.

The following are the key parameters of the bank's financials:

Segment-wise contribution of Revenue and Profit

For the second quarter, the bank’s Total Interest Income was up by 31% to Rs 25967 cr, while its Net Profits increased by 12.36% to Rs 2810 cr on a YoY basis. The Net Interest Margin improved by 40 basis points to 3.70% for the quarter ended September 2011. This was because the average cost of deposit is up by 58 basis points to 5.83%, while the yield on advances surged by 128 basis points to 10.78%.

Rising interest rates affected the asset quality of the banks, which deteriorated further. The Gross NPAs increased by 84 basis points to 4.19%, while the Net NPAs increased by 34 basis points to 2.04%.

Deposits increased by 13.78% to Rs 973171 cr on a YoY basis. This was mainly due to term deposits and CASA, which grew by 13%. The CASA ratio remained stable at 48%. Advances of the bank increased by 16.93% to Rs 810612 cr, of which large corporate loans grew by 21%, mid corporate advances were up by 13% and retail loans saw a rise of 12.86%.

SBI's Capital Adequacy Ratio decreased by 108 basis points to 11.4%. Of this, Tier 1 CAR stood at 7.47% at the end of September 2011. The bank's management expects the Tier 1 capital to be around 9% by March 2012.

Overall, the bank disappointed with its earnings. In a press conference, the management did not give a clear view on the provisions that the bank will make in the coming quarters. The bank's asset quality is worsening, and is the poorest among its peers. Even though the scrip took a beating of 7%, we would advise investors to stay away.