State Bank of India’s loan and deposit growth both came in at 16% year-on-year, with a stable CASA ratio of 45.5%, reports Nomura Equity Research in its Quick Note

SBI (State Bank of India) reported 3QFY13 net profit of Rs34 billion, marginally lower than Nomura’s estimate of Rs34.4 billion, largely on account of higher-than-expected provisions and lower NIMs (net interest margins) offset by strong trading gains.

Loan and deposit growth both came in at 16% year-on-year, with a stable CASA (current account, savings account) ratio of 45.5%. Delinquencies came in higher than estimated at Rs81.8 billion with LLPs (loan loss provisions) of 1.17%, taking the GNPL (gross non-performing loans) ratio to 5.3%.  Consequently, SBI’s asset quality pain continues in the current financial year, said Nomura Equity Research in its Quick Note.

The key result highlights and analysts’ findings, according to the Nomura Quick Note include:  

1. NIMs (net interest margins) of SBI are lower quarter-on-quarter on slippages, higher overseas mix and lower blended yields—NIM declined further to 3.31% from 3.34% in the previous quarter. Domestic NIM declined 14 bps (basis points) quarter-on-quarter to 3.63% as the loan yield declined 12 bps quarter-on-quarter compared to a flat cost of deposits. The SBI management guides towards a stable domestic NIM of 3.7% in 4QFY13.
    
2. LLPs and slippages higher, expect decline in Q4—Loan loss provisions were Rs27.7 billion versus an expected Rs21 billion (quarter-on-quarter growth of 51%). The bank indicated that of the Rs81.7 billion in delinquencies, Rs15 billion to Rs20 billion was upgraded in the current quarter and will be restructured. As per SBI, most of the stress came from its mid-corporate and SME portfolio and they expect net slippages to be much lower for Q4. 
    
3. The bank restructured Rs28.4 billion in Q3 versus Rs46.9 billion in Q2—Factoring these, the restructured loan ratio was 3.6% of total loan book. SBI guided towards a Q4 restructuring pipeline of Rs37 billion excluding Suzlon where it has a Rs30 billion of exposure (most of it non-funded).  
    
4. Loan and deposit growth remain healthy, fee income weak—Loans grew 15.6% year-on-year supported by robust 28.4% growth in its international book, and the bank guided towards growth of 17%-18% for FY13F as per the current run-rate. Retail loan growth remains strong driven by auto and mortgage loans (up 31.2% and 14.3% year-on-year). The bank indicated that 12% of its YTD (year-to-date) net loan book accretion has come from refinance opportunities. Deposit growth of 15.6% y-o-y was supported by stable CASA growth (CASA ratio up 59bps q-o-q).
    
5. The bank acquired 25 million saving bank customers in the last 12 months and has less than 1% of total deposits in bulk deposits. Non-interest income came in 11% higher than the Nomura estimate of Rs32.74 billion at Rs36.5 billion supported by robust trading gains of Rs4.2 billion. Fee income was weak on a year-on-year basis on lower traction from government business. 
    
6. Operating expenses are likely to inch up in Q4, Tier-1 comfortable—SBI indicated it would have to provide Rs8-9 billion (20% of quarterly staff costs) in Q4 towards provisions for wage revision. Tier-1 to be 10% for FY13F including confirmed equity infusion of Rs30 billion by the government