Asset quality improvement continues, +ve for the sentiments:
On the other hand, SBI has done well on asset quality front and therefore could see some improvement in the overall sentiments.
1) GNPA/NNPA are down from the peak of 10%/6% in Q1FY18 to 6.2%/2.2% now (Q4FY20). Even sequentially decline is sharp – 70bps/50bps during Q4.
2) SBI has strong pipeline of cases pending in the IBC from sectors like Steel, power and Telecom. Bank has taken enough haircut on the several of these accounts and resolution through IBC could bump-up the earnings in future.
3) Provision coverage ratio at 83-84% (including write-offs) is one of the best in the industry.
4) Slippage on full year is comparable to other leading banks… SBI at 2.5% of loan book, which is similar to HDFC/ICICI of the world. Even if we add Rs.6200 of slippage coming out of the moratorium book, FY20 slippage ratio stands at 3.6%, much better than several of its peers.
5) Moratorium at 22-23% of term loans is similar to some of the better rated private banks like HDFC or ICICI. Similarly, its working capital exposure under moratorium is like the above names. similar to other large banks.
6) Exposure to SMA-I & II has also seen decline – Rs.7,266 cr which was ~Rs.18,300 only 2 quarters back.