Stock Analysis – State Bank ank of India
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CONTENTS Introduction Company profile Financials
Fundamental analysis Peer Group Analysis Fundamental factors SWOT Analysis
Technical Analysis Pivot Point Daily chart
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Introduction The evolution of State Bank of India can be traced back to the first decade of the 19th century. It began with the establishment of the Bank of Calcutta in Calcutta, on 2 June 1806. The bank was redesigned as the Bank of Bengal, three years later, on 2 January 1809. It was the first ever joint-stock bank of the British India, established under the sponsorship of the Government of Bengal. Subsequently, the Bank of Bombay (established on 15 April 1840) and the Bank of Madras (established on 1 July 1843) followed the Bank of Bengal. These three banks dominated the modern banking scenario in India, until when they were amalgamated to form the Imperial Bank of India, on 27 January 1921. The State Bank of India emerged as a pacesetter, with its operations carried out by the 480 offices comprising branches, sub offices and three Local Head Offices, inherited from the Imperial Bank. Instead of serving as mere repositories of the community's savings and lending to creditworthy parties, the State Bank of India catered to the needs of the customers, by banking purposefully. The bank served the heterogeneous financial needs of the planned economic development. The corporate center of SBI is located in Mumbai. In order to cater to different functions, there are several other establishments in and outside Mumbai, apart from the corporate center. The bank boasts of having as many as 14 local head offices and 57 Zonal Offices, located at major cities throughout India. It is recorded that SBI has about 10000 branches, well networked to cater to its customers throughout India. State Bank of India is the country’s largest commercial bank in term of profit, assets, advances, deposits, branches and employee. SBI played a extremely important role in developing India, providing the financing needed to modernize the country’s agriculture industry and develop new irrigation method and backing the creation of dairy farming as well as pork and poultry industry. The Bank also provides the backing for the development of country’s infrastructure.
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STOCK INFORMATION Sector
Banking
Market cap
Rs.162327 cr
Face value
Rs. 10
Book Value
Rs. 1309.47
EPS(ttm basis)
Rs. 184.16
52 week H/L
Rs. 3515/ 1863
AVG. Daily vol (2wk)
5.07/9.05 lacs
Credit- Deposit
76.11%
Dividend
16.29%
Managing Director
R Sridharan
Listed At
NSE/BSE
Equity capital
Rs. 634.88 cr
SHARE HOLDING PATTERN (in %)
11-Mar
10-Dec
10-Sep
Promoter
59.4
59.4
59.4
FII
12.8
13.36
13.99
DII
16.57
15.59
15.54
Others
11.23
11.65
11.07
Total
100
100
100
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Financials Quarterly results (Rs in crores) Particulars
Dec-10
Sep-10
Jun-10
Mar-10
Interest Earned
21412.79
19808.09
18452.12
17965.59
Operating Expenses
17962.25
17456.29
16007.72
17280.24
Operating Profit Before Prov. & Cont.
6764.48
6357.01
6134.36
5193.88
Provisions & Contingencies
2051.51
2621.47
1551.37
2349.4
Depreciation
0
0
0
0
Provision for Taxes
1884.91
1234.17
1668.79
977.88
Deferred Tax
0
0
0
0
Net Profit
2828.06
2501.37
2914.2
1866.6
Extra-ordinary Items
0
0
0
0
Adjusted Profit After Extra-ordinary item
2828.06
2501.37
2914.2
1866.6
EPS (Unit Curr.)
44.54
39.39
45.9
29.4
EPS (Adj) (Unit Curr.)
44.54
39.39
45.9
29.4
Calculated EPS (Unit Curr.)
44.54
39.39
45.9
29.4
Calculated EPS (Adj) (Unit Curr.)
44.54
39.39
45.9
29.4
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178.15
157.57
183.61
117.6
Calculated EPS (Adj) (Ann.) (Unit Curr.)
178.15
157.57
183.61
117.6
Book Value (Unit Curr.)
0
0
0
0
Dividend (%)
0
0
0
0
Equity
635
635
634.88
634.88
Reserve & Surplus
71599.83
71599.83
65314.32
65314.32
Face Value
10
10
10
10
Public Shareholding (No Of.Shares)
257790915
257790915
257676309
257675444
Public Shareholding (% in Equity)
40.6
40.6
40.59
40.59
(%) of shares held by GOI
59.4
59.4
59.41
59.41
Non Encumbered - No. of Shares
377207200
377207200
377207200
377207200
Non Encumbered - % in Total Promoters Holding
100
100
100
100
Non Encumbered - % in Total Equity
59.4
59.4
59.41
59.41
PBIDTM(%)
79.75
77.89
85.26
78.42
PBDTM(%)
22.01
18.86
24.84
15.83
PATM(%)
13.21
12.63
15.79
10.39
Capital Adequacy Ratio
11.95
12.05
12.17
12
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8.69
8.8
8.79
8.5
Tier II Capital
3.26
3.25
3.38
3.5
Gross Non Performing Assets
23437.75
23204.59
20825.22
19534.89
Net Non Performing Assets
11695.14
11601.23
11074.37
10870.17
(%) Gross Non Performing Assets
3.17
3.35
3.14
3.05
(%) Net Non Performing Assets
1.61
1.7
1.7
1.72
Return on Assets(Annualised)
0.94
0.87
1.07
0.69
Fundamental analysis Peer group comparison (Rs in cr.) SBI
HDFC Bank
ICICI Bank
PNB
Sales
70,993.92
16,172.91
25,706.93
21,466.91
PAT
9,166.05
2,948.69
4,024.98
3,905.35
Equity
634.88
457.74
1,114.89
315.30
--
--
--
--
Ratios OPM %
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12.91
18.23
15.66
18.19
RONW
13.90
13.70
7.80
24.06
EPS
144.37
67.60
36.14
123.86
CEPS
144.37
64.42
36.10
123.86
PE
--
--
--
--
PB
2.00
4.06
2.07
1.96
BV
1,038.77
470.13
462.99
514.78
Ownership
40,613.00
40,613.00
40,887.00
40,613.00
Promoter & Promoter Grp
37,72,07,200
10,86,43,220
--
18,37,50,957
Indian
37,72,07,200
10,86,43,220
--
18,37,50,957
Foreign
--
--
--
--
Public
25,77,91,791
35,65,82,464
1,15,14,22,189
13,30,61,200
Institution
18,64,85,869
18,67,44,925
72,29,78,666
11,66,02,784
FII
8,12,72,949
13,27,23,097
45,18,88,143
6,12,33,891
DII
10,52,12,920
5,40,21,828
27,10,90,523
5,53,68,893
Non Institution
7,13,05,922
16,98,37,539
42,84,43,523
1,64,58,416
Bodies Corporate
1,53,63,954
4,05,52,046
4,37,84,408
37,38,556
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Fundamental Factors Nation Wide Presence SBI provides a range of banking services through its vast network of branches in India and overseas. The State Bank group with a network of 17337 branches including 4841 branches of its six associates Banks dominates the banking industry. In addition to banking, the Group, through its various subsidiaries, provides a whole range of financial services which include life insurance, merchant banking, mutual fund, credit cards, factoring, security trading, pension fund management and primary dealership in the money market. SBI has seven associates’ banks, “State Bank of Bikaner & Jaipur, State Bank of Hyderabad, State Bank of Indore, State Bank of Mysore, State Bank of Sourashtra and State Bank of Travancore”. But now SBI has only five associate’s banks that with SBI constitute the State Bank group. Acquisition of State Bank of Indore added 470branches to SBI’s existing network of 12448 and over 21000 ATMs. Overseas expansion The number of foreign offices increased from 92 as on 31st March 2009 to 142as on 31st March 2010 spread across 32 countries. The offices comprised 42branches, 8 representative offices, 2 sub offices, 2 extension counters, 82offices of the six foreign banks subsidiaries, an associates (Bank of Bhutan), equity investments in a foreign bank (Sterling Banks, Nigeria) and 2 managed exchange companies. Advances and Deposits of the bank expected to increase from its foreign branches because SBI has opened two more branches in overseas market in current financial year. Rising Operating Performance During the quarter, advances of the bank increased by 4.2% qoq and 15.87% . Deposits grew by 4.9% qoq and 10.7% YOY on the back of healthy 27.7% growth in CASA deposits. The CASA ratio of the Bank increased by30bp to 47.8%
on the quarter
ended September 30, 2010.
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Comfortable CAR Capital adequacy ratio as per the Basel ii norms of the bank is 13.39% at the end of the March 2010 with Tier-I at 9.45%. The capital adequacy of the bank is high as compare to the minimum mandatory requirement of 9%. The SBI is planning to raise Rs.20000cr through a right issue in last quarter of this fiscal. It would be increase the capital adequacy of the Bank Industrial Demand Gross Advances of the bank grew by Rs. 92940cr, a growth of 16.94% from s.548540cr in March 09 to Rs. 641480cr in March 2010. Consolidated advances of the bank grew by 15.88% from 750362.38cr in March 2009 to Rs.869501.63cr. SBI advances expected to increase by 20% in financial year 2011and 22.4% in financial year 2012 because of the industrial demand and more infrastructure funding by the bank. GOI is planning to invest around $1tr in next five year plan. Bank’s advances are highly correlated to the overall performance of the economy in tune to the industrial performance. Industrial demand for the loan will be remain high in near future because of the more industrial output d government spending. Gross advances of the Bank grew by 19.47% from Rs. 580237cr as on quarter ended September 30th2009 to Rs. 693224cr as on quarter ended September 30th 2010. Increase in CASA due to higher deposit rate Deposits of the Bank went up by Rs. 62043cr, a growth of 8.36% from RS .742043cr in March 2009 to Rs. 804116cr in March 2010 driven by CASA Growth of 26.76%. Consolidated deposits of the bank grew BY 10.32% from Rs..1011988.31cr as on March 31, 2009 to Rs. 116464.50cr as on March 31, 2010.
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Deposits of the bank expected to grow by 15% in current fiscal and around 19% in Fiscal 2011-12 because of the soaring deposits rate by the bank. State Bank of India has increased its deposits rate by 100 -50 bp. Deposits of the bank went up from 772904cr in September 09 855345cr in September 10 recording a YOY growth of 10.67%.
Net Interest Income increased by 45.59 % IN Q2 Net Interest Income of the bank increased by 45.59% as on quarter ended September 30, 2010 against a growth of 4.69% as on quarter ended september30, 2009. Interest expenses on deposits of the bank decreased by 4% during the quarter September 30, 2010 against a growth of 13.93% during Q2FY09, through strategic shedding of high cost bulk deposits and growth in CASA deposits. Net Interest Income of the bank will be increase in future because of the advance of the bank is rising state bank of india has increased its base rate to 7.755 and BPLR by 25bp. It would be increase the interest income of the bank. The Bank’s reported NIM has been witnessing an upward trend since hitting a low 2.30% in 1QFY2010, from which it has improved by 113bp to 3.43% in2QFY2011. We expect the NIM of the bank will be increase because of the increase in the interest income of the bank. Total Non-interest income of the bank up by 13.62% despite profit on sale of investments coming down by 63.82% (Rs. 348cr). Non Interest Income excluding profit on sale of investment is up by 27.80%. Fee Income of the Bank went up by 40.04% YOY in Q2FY11, driven by robust growth in cross selling commission on LC/BG and government business.
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SWOT ANALYSIS Location of Factor
TYPE OF FACTOR
•
Internal
•
•
Favorable
Unfavorable
Strengths
Weaknesses
Strong domestic market position sustaining reach and customer confidence Strong capital position helping pursue growth initiatives SBS merger further hastens SBI and its associate banks merger and helping defend its leadership position
•
•
Opportunities •
External
•
•
•
SBI could be the highest beneficiary from the increasing adoption of Etransactions Investments in information technology will decrease transaction costs of SBI New business initiative will expand the market share and increase the revenues Growth in general insurance industry will help increasing the market share
Reduction in the asset quality increasing non performing asset’s ratio Susceptible to political interventions
Threats •
•
Opening of Indian banking sector will cause intense competition Global economic slowdown could reduce demand for banking services in India
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TECHNICAL VIEW SBI CMP – Rs. 2819
Target Price – Rs.3000 Rs.
Moving averages Moving Averages Daily Weekly
20 Day 2721.39 2694.36
50 Day 2677.53 2714.80
100 Day 2702.09 2367.99
200 Day 2814.35 1952.19
Weekly Pivot SCRIPT SBI
R4 3016
R3 2945
R2 2874
R1 2846
P 2803
S1 2775
S2 2732
S3 2661
S4 2590
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State bank of India has formed a head and shoulder pattern in daily chart. The head and shoulder pattern is generally regarded as a reversal pattern and it is most often seen in uptrend. It is also most reliable when found in uptrend as well. State bank of India is further supported by RSI in daily chart and it is around 60.97 which show that the stock has potential to go up. The stock is consolidating around 2700-2850 2700 which is just below w the 200 days moving average and if it breaches the head at around 2840, on the break out of head and shoulder and stock above 200 DMA, we expect stock to continue its uptrend and test the level of 300 3000. On weekly chart, the he stock has retraced back from its all time high of 3500 to 2450 level and there on forming an uptrend on support line drawn from troughs o of July 2009. From then, it is above 50 days moving average and if it breaches this consolidation range rang of 2700- 2850, further supported by RSI which is 53.93; stock has potential tential to test the upper resistance tance line at around 3000 3000.
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