India Bank Earnings: SBI Q3 turns out the ugly parade

The bank created 39 bln in restructuring as INR 114 Bln added to Non performing loans in a single quarter, adding pressure even as the bank decreased provisioning in the last two quarters of the fiscal, to 58% in Q3 . However a 4.5% increase in Advances ensured another double digit increase in Net Interest Income to INR 115 Bln and Assets of INR 11Trillion with Deposits running INR13 Trillion at a 16.7% clip . Gross NPAs at 5.7% are likely just more than three quarters there yet and a Net 3.24% NPA looks ugly.

We stand by a 1300 price target to be broken on the downside in the short term now, 1280 levels heuristically offering the bank new consolidation. SBI PAT is down one in three to INR 22 Bln and aims to improve Cost and other income as the Chair announces post earnings NPA control committee restructuring. Administrative staff(quasi due diligence at best) has been deputed to front offices in measures listed. Technology may definitely provide a viable solution but Credit scoring of SME and Export credit provide unique challenges.

Employee interests may indeed warrant a look at buyback programs at this stage but the bank continues to need annual capital infusions from Government coffers as the largest bank in India. 15,297 branches with 40,344 correspondent banks, totaling a 100k outlets is definitely a great business opportunity for someone scoring the India puzzle.

As unlikely comparison and bank memes go, Barclays has turned out into a India phobe in the open, it’s Head EM Economist  using the required dissing of China to add the bumbling India quatrains to complete the report. Needless to say any such composition, follows the new meme to instead look for new EMsllike Mexico where one finds the bad mix of resource dependent Dollar imperilled markets like Turkey and Argentina.

Kotak seems to be a market favorite on this bet, if prices this afternoon are a suitable explanation ( with no other important news or rumors on the wires) HDFC Bank has finally taken off even as HDFC investment approvals are awaited. The mid afternoon score of 10250 is barely a tick as the street forgets SBI results.

WPI did make 5% in the December data release a 33% downtick from November’s spike but Core Inflation is at 2.76% . Bajaj Auto faces a revolution at Chakanypt (8%) and a ban on Exports in Eg and Sun Pharma has eased defensive buying , while the Banknifty rests at new 10400 levels with SBI’s degradation no longer a surprise, but the occasion serving a reminder to those indiscriminately picking weaker banks in the index

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