SIB reported weak quarter as PAT stood at Rs730mn (~9% below PLe) adversely impacted by higher interest reversals and provisioning expenses. NII growth stood at tepid 8% YoY while margins declined 29bp QoQ (13bp due to interest reversals). Asset quality deteriorated sharply with fresh slippages spiking to Rs8.45bn led by elevated slippages in corporate segment resulting in 41% QoQ/ 65% QoQ rise in GNPL/NNPLs respectively, despite bank selling Rs2.3bn worth of loans to ARC. Management suggested that the book is largely cleansed and asset quality is likely to improve hereon and guided for ~15% YoY loan growth in FY17E. We have cut our FY17 estimates by 4% to factor in higher credit costs and delinquency rate. We revise our TP to Rs22 (from Rs24) based on 1.0x Sep‐17E ABV.
Weak operating performance: SIB reported 9.5% YoY growth in total revenues on a low base (8.3% QoQ decline) as margins declined by 29bp QoQ (13bp QoQ due to interest reversals). Core‐fee growth remained muted at 3.8% YoY while fored transaction income declined sharply. However 4% YoY decline in operating expenses led by adjustment of pension liabilities helped improve operating profit growth to 35% YoY. Management maintains its guidance of 2.8‐2.9% margins for FY17E aided by repricing of bulk deposits.
Loan growth stood at 10% YoY; retail (ex‐gold) & agri remain growth drivers:Loan growth stood at 10% YoY and was led by Agri, Retail (ex‐gold) & SME. Retail loan book reported healthy uptick in loan growth at 7.6% QoQ and ex‐gold retail growth was strong at 22% YoY. Agri portfolio also witnessed strong growth of ~41% YoY and SIB guided that with revived interest in gold the overall retail loan growth should be healthy for FY17E. SIB continues to de‐focus on corporate loans and has thus guided for overall loan growth of 15% YoY for FY17E.
blog comments powered by Disqus
Asset quality remains patchy; outlook relatively better: Asset quality deteriorated sharply with fresh slippages spiking to Rs8.45bn led by elevated slippages in corporate segment resulting in 41% QoQ/ 65% QoQ rise in GNPL/NNPLs respectively, despite bank selling Rs2.3bn worth of loans to ARC. O/s restructured portfolio has declined from Rs19.3bn in Q3FY16 to 9.49bn as Rs6.70bn worth of SEB loans were transferred to investment book on UDAY bond conversion. SIB suggested that the book is largely cleansed now and slippages from restructured could be 20% in FY17E.