2020 will be the best year in terms of recoveries – Rajnish Kumar, SBI

Excerpts from an interview of Mr Rajnish Kumar, Chairman, State Bank of India with live mint dated- 02-01-2019:

Update on the Indian Equity Market:

On Thursday, NIFTY closed +0.8% higher. Among sectoral indices NIFTY Metal (2.7%), NIFTY PSU Bank (+2.0%), NIFTY PVT Bank (+1.2%) closed higher. NIFTY IT closed on marginally negative. The biggest gainers were Tata Motors (+5.1%), Tata Steel (+4.3%) and UltraTech Cement (+4.2%) whereas Eicher Motors (-2.3%), BPCL (-1.0%), and Bajaj Auto (-0.9%) ended with losses.

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• Mr Kumar says, there is an issue around credit growth particularly in the corporate sector. This year, estimated growth is around 7-8%.
• Non-performing assets (NPAs) are alright, atheist the recoveries are happening.
• Term loans are growing. The year-on-year growth is ₹1.7 trillion. Last year, the bank had seen good disbursements and that helped to achieve high credit growth of 13%.
• He says the pickup in capacity utilization has not happened as of now. It would have been reflected in working capital utilisation if there was any pickup.
• Speaking about sector growth, he says, only three sectors have proposals with SBI – roads, solar and city gas projects or oil and gas.
• Speaking about Jet Airways, he says, it has been left to resolution professional. If the RP decides to go for one more round of bidding, then the bank will make one more attempt.
• The pace of referrals with National Company Law Tribunal (NCLT) will come down. There are not many cases now that are ₹1,500 crore and above.
• Speaking about steps expected by government or RBI to revive growth, he says, some sector-specific steps are required, telecom issues need to be sorted out.
• In terms of recoveries, the coming quarters are going to be the best. 2018 was the best year in terms of NPA provisions and 2020 will be best year in terms of recoveries. 2021 onwards things will be normal unless there is a major shock.

Consensus Estimate (Source: market screener and investing.com website)

• The closing price of SBIN was ₹ 339/- as of 02-January-20. It traded at 1.3x / 1.2x / 1.0x the consensus Book Value for FY20E / 21E / 22E of ₹ 251/ 281/ 322 respectively.
• Consensus target price of ₹ 376/- implies a Price to Book multiple of 1.1x on FY22E Book Value of ₹ 322/-.