Tag - loans

25 May

Will offer better interest rates to depositors once loan book starts growing – State Bank of India

Update on the Indian Equity Market:

On Tuesday, NIFTY ended marginally higher at 15208 (+0.1%) as it could not sustain the intraday higher levels. Among the sectoral indices, MEDIA (+3.2%), IT (+1.0%), and AUTO (+0.7%) ended higher while PSU BANK (-1.3%), PRIVATE BANK (-0.9%), and BANK (-0.8%) led the losers. Among the stocks, ASIANPAINT (+3.5%), TITAN (+3.3%), and JSWSTEEL (+3.0%) led the gainers while HDFCBANK (-1.9%), HDFCLIFE (-1.4%), and AXISBANK (-1.2%) led the losers.

Excerpts of an interview with Mr. Dinesh Khara, Chairman, State Bank of India (SBIN) published in The Economic Times on 23rd May 2021:

  • SBIN has been cautious in terms of building a healthy balance sheet. After careful evaluation and ensuring there are enough risk mitigants, they underwrite the risk.
  • There has been a growth in the retail book, and the retail book’s stress is the least possible. The growth in the retail book provides a decent earnings headroom in the future.
  • The corporate credit growth in 4QFY21 looks muted but they have sanctioned limits that have been utilised to the extent of ~30%. They have seen 70% utilisation. There are sanctioned term loans that have not been availed to the extent of 28-30%.
  • They expect strong growth post demand recovery once Covid 2.0 subsidies. He is hopeful of robust credit growth in the corporate segment going forward. The Agriculture segment is going to be in focus in FY22 in addition to retaining the retail advances growth.
  • The resolution framework (RF) 2 announced on May 5 allows the banks to offer the resolution up to Rs 250 mn to individuals. The individuals in the personal loan segment can be offered the resolution or restructuring as needed.
  • SBIN does not expect much of a problem in the cash flow of their retail borrowers. There could be some anxieties but the bank isn’t concerned much.
  • When it comes to raising funds from the market, it is a function of liquidity in the market. Going forward, Mr. Khara believes the corporates will continue to borrow from banks. Depending upon their risk rating, corporates will be looking at borrowing from the markets. Bank borrowing or borrowing from the market, the only difference is the instrument. SBIN is a strong player in the market borrowing and has a treasury book of Rs 13000 bn.
  • In 4QFY21, the credit costs have gone down by more than 100bps but credit costs evolve as it will be a function of the macro and how the book behaves going forward. They would prefer to maintain the credit costs at these levels because going below the current levels would affect the profitability.
  • SBIN would prefer to offer better interest rates to depositors once the loan book starts growing.
  • Khara believes the deposit rates have bottomed out and there would not be any further cutting down of the deposit rate.
  • Economic situation permitting, SBIN would like to build the loan book and he expects to grow at a pace of at least 10%.

Asset Multiplier Comments

  • SBIN has been focusing on improving asset quality with credit cost and slippages reported in 4QFY21 being the lowest in 20 years. Despite Covid-19 induced stress, the retail loan book has done well and is stable.
  • With a gradual recovery in the return ratios, there could be a much better translation of operating profit to net profit in FY22-23E led by lower credit costs.

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

  • The closing price of SBIN was ₹ 414/- as of 25-May-2021. It traded at 1.4x/ 1.2x the consensus book value estimate of ₹ 300/ 339 for FY22E/FY23E respectively.
  • The consensus target price of ₹ 456/- implies a PB multiple of 1.3x on FY23E BV of ₹ 339/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

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04 Dec

Demand for loans coming back – SBI

Update on the Indian Equity Market:
On Thursday, Nifty 50 ended at 13,134 (+0.2%). Among the stocks, MARUTI (+7.3%), NTPC (+4.2%), and ONGC (+4.2%) ended with gains while SBILIFE (-2.0%), HDFCBANK (-1.8%), and TCS (-1.4%) ended the day with losses. Among the sectoral gainers, PSU BANK (+4.8%), MEDIA (+2.8%), and METAL (+2.5%) led the gainers and IT (-0.5%), PRIVATE BANK (-0.5%), and FINANCIAL SERVICES (-0.3%) led the laggards.

Excerpts of an interview with Mr. Dinesh Khara, Chairman, State Bank of India (SBIN) published in Business Standard on 3rd December 2020:
• The bank is cautious about loan demand from vaccine manufacturers given the huge investments which may turn sour if central approvals are not forthcoming. Proposals worth Rs 1,000 crore have been received from the pharmaceutical segments.
• When there is unlocking, there is demand revival, which is going to be the main growth engine in the current scenario. He expects the demand to be back with a vengeance after covid.
• There has been a significant improvement in sanctions and disbursements to unsecured personal loans and express credit loans. In September, in the personal loans space, there was 55% growth year-on-year. Disbursements went up as high as 61 percent. In the home loans segment, there was a 49% growth.
• SBIN has taken stock of the special mention accounts (SMA) 1 and 2 and there is time till March 31 for carrying on the restructuring exercise. There is an internal target of completing 50% of restructuring by December, and the rest by February.
• They have given unsecured loans to customers who have been maintaining their salary accounts, employed with either the government or well-rated private sector corporates.
• Recovery is ensured through the Insolvency and Bankruptcy Code, restructuring, and the non-discretionary one-time settlement schemes. One major resolution went through in the early part of this quarter.
• There has been a delay in big accounts in financial sectors looking for resolution due to litigation. In such cases, an elaborate process is laid out, and timelines given for such accounts are stringent.
• In the recent past, they have raised tier I and tier II capital with prices set at the benchmark.
• SBIN had the work-from-home policy in 2017 and the pandemic has helped SBIN leverage this policy. They have reframed this policy to ‘work from anywhere’ and digitised some of the non-customer facing activities as well. They can’t have a work-from-home policy for everyone as they are a customer-facing organisation and need to engage with customers.
• When YONO, SBIN’s digital banking app was put in place, it was to be a distribution platform for the bank’s products. The definite and concrete plans in terms of listing it will be shared in some time.
• In the post-Covid world, some in-person meetings will probably come back. There will be a paradigm shift when it comes to the way SBIN has been conducting themselves in the past to the way they will conduct themselves in the future.

Consensus Estimate: (Source: market screener and investing.com websites)
• The closing price of SBIN was ₹ 256/- as of 03-December-2020. It traded at 1x/ 0.9x/ 0.8x the consensus book value estimate of ₹ 262/ 286/ 318 for FY21E/ FY22E/FY23E respectively.
• The consensus target price of ₹ 276/- implies a PB multiple of 0.9x on FY23E BV of ₹ 318/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

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27 Apr

Few customers opting for a moratorium: VP Nandkumar, Manappuram Finance

Update on Indian Equity Market:

After two days of rally, Nifty closed the week 1.7% lower at 9,154. Among the sectoral indices, only PHARMA (1.4%) sector managed to close the day higher whereas all other sectors closed negatively with REALTY (-4.2%), FIN SERVICES (-3.8%) and PSU BANK (-3.7%) being the biggest losers. Within the index, 10 out of 50 stocks managed to close in green led by RELIANCE (4%), BRITANNIA (3.5%) and SUNPHARMA (1.7%) while BAJFINANCE (-8.7%), INFRATEL (-7.9%) and ZEEL (-7.5%) were the laggards

Edited excerpts of an interview with Mr VP Nandkumar, MD & CEO, Manappuram Finance published on CNBC TV18 on 23rd April 2020:

 

  • Mr Nanadkumar said that 85% of the total Assets under Management (AUM) are related to gold loans. In this segment, very few customers have opted for the moratorium given by the company. The collections are happening at a normal rate. The company is able to do collections through different digital payment solutions.
  • In the gold loan business, the company is expecting reasonable growth in the coming few quarters. The reason for this uptick in demand is due to limited avenues available for borrowing due to lockdown. 
  • The company is expecting 10-15% growth in the loan book in the current year. The rise in the gold price is also one of the reasons why there will be demand for gold loans.
  • The company has a loan portfolio of around Rs 50,000 mn to microfinance. This is one-third of the gold loans book. Few customers from the portfolio had asked for the moratorium and the company has allowed the moratorium period. 
  • He mentioned that asset quality is expected to remain stable. With the increasing gold prices, it has become valuable to the customers. It has also led to a lower loan to value ratio. He expects this will help the company maintain its asset quality.

 

Consensus Estimate: (Source: market screener, investing.com websites)

  • The closing price of Manappuram Finance was Rs 107/- as of 24-April-2020. It traded at 1.6x/ 1.3x/ 1.1x the consensus Book Value estimate of Rs 66.5/ 83.2/ 101 for FY20E/ FY21E/ FY22E respectively.
  • The consensus target price of Rs 182/- implies a PB multiple of 1.8x on the FY22E EPS estimate of Rs 101/- 

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

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