State Bank's Q3 numbers impress.
Punters expect the banking stocks, that have been strangulated in a bear hug over the past three months, would now see some reprieve in the week ahead, taking cue from these results.
SBI has posted a net profit of ` 2,828 crore in the third quarter, a rise of 14.08 per cent compared to the year ago quarter, despite 84 per cent higher provisions at ` 1,797 crore and about three times loan loss provisions of ` 1,632 crore. Excluding these provisions, the net profit at ` 3,280 crore would have been 32.31 per cent higher than that of the same quarter last fiscal.
" SBI has got a good set of numbers this time. It has surprised us in terms of topline, profit after tax ( PAT), net interest income ( NII) and several other business parameters, including high CASA ratio of over 48 per cent," said Viraj Gandhi, analyst at ICICI Securities.
CASA deposits are the funds in current account and savings accounts, which are the cheapest funds for the banks.
Growth in interest expenses on deposits were contained at 3.22 per cent due to robust growth in CASA deposits which increased by 27.71 per cent. CASA ratio ( share of CASA deposits to the total deposits) increased by 523 basis points ( or bps, 100 of which are equal to a percentage) to 48.17 per cent in December 2010.
O. P. Bhatt, chairman of the bank said that the bank would meet its credit growth target of 18- 19 per cent for the fiscal ending March 2011. The focus would be on increasing the fee income and reducing the bad loans.
" However, policy rate hikes are the immediate threat," Bhatt added. The Reserve Bank of India ( RBI) is expected to hike policy rates by a further 0.25 per cent on Tuesday, when third quarter review of monetary policy is scheduled. RBI has hiked the repo rate ( at which it offers loans to banks) by 1.75 per cent over the last 12 months, mainly to tame inflation.
Policy rate hikes induce rate rise in money markets, including in government securities, resulting in lower asset values for banks' statutory investments, leading to lower profitability.
" The bank will be able to maintain net interest margins ( NIM) at the current levels for this fiscal year," Bhatt said. NIM rose to 3.61 per cent in the quarter from 3.43 per cent in the previous quarter.
NII rose 43 per cent to ` 9,050 crore, more than the market estimates of ` 8,400 crore, as gross advances grew 22 per cent from a year ago to reach ` 7.40 lakh crore as on end- December 2010.
The bank's net non- performing asset ( NPA) ratio fell to 1.61 per cent in the quarter from 1.88 per cent a year ago.
Another analyst, who did not wish to be identified, said, " All banking stocks will react positively on Monday following the surprisingly positive results from SBI." SBI and its subsidiaries, commands nearly 25 per cent share in business, deposits and credit of the industry.
Bhatt also has given a robust guidance for the forthcoming fiscal by stating that the credit growth would be in the range of 20- 22 per cent for the bank for the next fiscal 2011- 12.
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