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Page 1: STATE BANK OF INDIA-ANALYSIS by

Stock Analysis

Stock Analysis – State Bank of India

www.capitalheight.com

ank of India

www.capitalheight.com

Page 2: STATE BANK OF INDIA-ANALYSIS by

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CONTENTS

Introduction

Company profile

Financials

Fundamental analysis

Peer Group Analysis

Fundamental factors

SWOT Analysis

Technical Analysis

Pivot Point

Daily chart

Page 3: STATE BANK OF INDIA-ANALYSIS by

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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.

Page 4: STATE BANK OF INDIA-ANALYSIS by

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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

Page 5: STATE BANK OF INDIA-ANALYSIS by

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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.

& Cont. 6764.48 6357.01 6134.36 5193.88

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

Extra-ordinary item 2828.06 2501.37 2914.2 1866.6

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

Curr.) 44.54 39.39 45.9 29.4

Page 6: STATE BANK OF INDIA-ANALYSIS by

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Calculated EPS (Ann.) (Unit

Curr.) 178.15 157.57 183.61 117.6

Calculated EPS (Adj) (Ann.)

(Unit Curr.) 178.15 157.57 183.61 117.6

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

Of.Shares) 257790915 257790915 257676309 257675444

Public Shareholding (% in

Equity) 40.6 40.6 40.59 40.59

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

Non Encumbered - No. of

Shares 377207200 377207200 377207200 377207200

Non Encumbered - % in

Total Promoters Holding 100 100 100 100

Non Encumbered - % in

Total Equity 59.4 59.4 59.41 59.41

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

Page 7: STATE BANK OF INDIA-ANALYSIS by

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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

Assets 23437.75 23204.59 20825.22 19534.89

Net Non Performing Assets 11695.14 11601.23 11074.37 10870.17

(%) Gross Non Performing

Assets 3.17 3.35 3.14 3.05

(%) Net Non Performing

Assets 1.61 1.7 1.7 1.72

Return on

Assets(Annualised) 0.94 0.87 1.07 0.69

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

% -- -- -- --

Page 8: STATE BANK OF INDIA-ANALYSIS by

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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 &

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

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

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

Page 9: STATE BANK OF INDIA-ANALYSIS by

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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.

Page 10: STATE BANK OF INDIA-ANALYSIS by

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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.

Page 11: STATE BANK OF INDIA-ANALYSIS by

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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.

Page 12: STATE BANK OF INDIA-ANALYSIS by

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SWOT ANALYSIS

Location of Factor TYPE OF FACTOR

Favorable Unfavorable

Internal

Strengths

• Strong domestic market position sustaining reach and customer confidence

• Strong capital position helping pursue growth initiatives

• SBS merger further hastens SBI and its associate banks merger and helping defend its leadership position

Weaknesses

• Reduction in the asset quality increasing non performing asset’s ratio

• Susceptible to political interventions

External

Opportunities

• SBI could be the highest beneficiary from the increasing adoption of E-transactions

• Investments in information technology will decrease transaction costs of SBI

• New business initiative will expand the market share and increase the revenues

• Growth in general insurance industry will help increasing the market share

Threats

• Opening of Indian banking sector will cause intense competition

• Global economic slowdown could reduce demand for banking services in India

Page 13: STATE BANK OF INDIA-ANALYSIS by

TECHNICAL

SBI CMP – Rs. 2819

Moving averages

Moving Averages

Daily

Weekly

Weekly Pivot

SCRIPT R4 R3

SBI 3016 2945

ECHNICAL VIEW

Target Price – Rs.

20 Day 50 Day 100 Day

2721.39 2677.53 2702.09

2694.36 2714.80 2367.99

R2 R1 P S1 S2

2874 2846 2803 2775 2732

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Rs.3000

200 Day

2814.35

1952.19

S3 S4

2661 2590

Page 14: STATE BANK OF INDIA-ANALYSIS by

State bank of India has formed a head and shoulder pattern in daily chart. The head

and shoulder pattern is generally

seen in uptrend. It is also most

India is further supported by RSI in daily

the stock has potential to go up. The stock is consolidating around 2700

just below the 200 days moving average

the break out of head and shoulder

continue its uptrend and test the level of 300

On weekly chart, the stock has

and there on forming an uptrend on support line drawn from troughs o

then, it is above 50 days moving average

2700- 2850, further supported by RSI which is

upper resistance line at around 3000

has formed a head and shoulder pattern in daily chart. The head

is generally regarded as a reversal pattern and it is

seen in uptrend. It is also most reliable when found in uptrend as well. State bank of

is further supported by RSI in daily chart and it is around 60.97 which

go up. The stock is consolidating around 2700

w the 200 days moving average and if it breaches the head at around

the break out of head and shoulder and stock above 200 DMA, we expect stock to

continue its uptrend and test the level of 3000.

he stock has retraced back from its all time high of 3500 to 2450 level

and there on forming an uptrend on support line drawn from troughs of July 2009.

then, it is above 50 days moving average and if it breaches this consolidation rang

further supported by RSI which is 53.93; stock has potential to test the

tance line at around 3000.

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has formed a head and shoulder pattern in daily chart. The head

regarded as a reversal pattern and it is most often

found in uptrend as well. State bank of

which show that

go up. The stock is consolidating around 2700-2850 which is

around 2840, on

we expect stock to

back from its all time high of 3500 to 2450 level

July 2009. From

this consolidation range of

tential to test the

Page 15: STATE BANK OF INDIA-ANALYSIS by

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