STATE BANK OF INDIA-ANALYSIS by www.capitalheight.com

Stock Analysis – State Bank of India
ank

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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. 6764.48 6357.01 6134.36 5193.88
& Cont.

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 2828.06 2501.37 2914.2 1866.6
Extra-ordinary item

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 44.54 39.39 45.9 29.4
Curr.)


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Calculated EPS (Ann.) (Unit 178.15 157.57 183.61 117.6
Curr.)

Calculated EPS (Adj) (Ann.) 178.15 157.57 183.61 117.6
(Unit Curr.)

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 257790915 257790915 257676309 257675444
Of.Shares)

Public Shareholding (% in 40.6 40.6 40.59 40.59
Equity)

(%) of shares held by GOI 59.4 59.4 59.41 59.41

Non Encumbered - No. of 377207200 377207200 377207200 377207200
Shares

Non Encumbered - % in 100 100 100 100
Total Promoters Holding

Non Encumbered - % in 59.4 59.4 59.41 59.41
Total Equity

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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Tier I Capital 8.69 8.8 8.79 8.5

Tier II Capital 3.26 3.25 3.38 3.5

Gross Non Performing 23437.75 23204.59 20825.22 19534.89
Assets

Net Non Performing Assets 11695.14 11601.23 11074.37 10870.17

(%) Gross Non Performing 3.17 3.35 3.14 3.05
Assets

(%) Net Non Performing 1.61 1.7 1.7 1.72
Assets

Return on 0.94 0.87 1.07 0.69
Assets(Annualised)

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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NPM 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 & 37,72,07,200 10,86,43,220 -- 18,37,50,957
Promoter Grp

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 1,53,63,954 4,05,52,046 4,37,84,408 37,38,556
Corporate


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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
Favorable Unfavorable
Strengths Weaknesses

• Strong domestic market • Reduction in the
position sustaining reach asset quality
and customer increasing non
confidence performing asset’s
Internal
• Strong capital position ratio
helping pursue growth • Susceptible to
initiatives political interventions
• SBS merger further
hastens SBI and its
associate banks merger
and helping defend its
leadership position

Opportunities Threats

• SBI could be the highest • Opening of Indian
beneficiary from the banking sector will
increasing adoption of E- cause intense
transactions competition
External
• Investments in • Global economic
information technology slowdown could
will decrease transaction reduce demand for
costs of SBI banking services in
• New business initiative India
will expand the market
share and increase the
revenues
• Growth in general
insurance industry will
help increasing the
market share


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TECHNICAL VIEW
SBI CMP – Rs. 2819 Target Price – Rs.3000
Rs.

Moving averages

Moving Averages 20 Day 50 Day 100 Day 200 Day
Daily 2721.39 2677.53 2702.09 2814.35
Weekly 2694.36 2714.80 2367.99 1952.19

Weekly Pivot
SCRIPT R4 R3 R2 R1 P S1 S2 S3 S4
SBI 3016 2945 2874 2846 2803 2775 2732 2661 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
2700-2850 which is
just below the 200 days moving average and if it breaches the head at around 2840, on
w
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 stock has retraced back from its all time high of 3500 to 2450 level
he
and there on forming an uptrend on support line drawn from troughs o July 2009. From
of
then, it is above 50 days moving average and if it breaches this consolidation range of
rang
2700- 2850, further supported by RSI which is 53.93; stock has potential to test the
tential
upper resistance line at around 3000
tance 3000.


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