SBI rallies 10% in two days on expectation of improvement in asset quality

Shares of State Bank of India (SBI) have rallied 6% to Rs 269 per share, extending their 4% gain on the BSE on Tuesday, on expectations of improvement in asset quality of the state-owned bank.
“While gross slippages for FY18 were high at around Rs 1 trillion (5.2% of advances), management’s watchlist of accounts (Rs 25.8 billion) is a low 13% of advances and lends comfort on asset quality,” analyst at BOB Capital Markets said in result review.

“With non-performing assets (NPA) recognition largely behind us, we expect slippages to normalise at 2% of advances in FY19 and 1.4% in FY20. Hence, we estimate credit costs of 200bps/140bps in FY19/FY20, resulting in ROE improving from –3.2% in FY18 to 11% in FY20,” the brokerage firm said in a note.

We reiterate BUY on SBI with 12 month target price of Rs 345, given a healthy domestic credit growth outlook for the bank (10% CAGR over FY18-FY20E) backed by its dominant market share (around 25%), likely improvement in asset quality (NNPA of 4.5% in FY20E), and adequate capital (tier-1 at around 10% in Mar’18).

Long queues again? ATMs go dry as many states face cash crunch: Top updates

A cash crunch has been reported in several states of India -- Karnataka, Maharashtra, Andhra Pradesh, Rajasthan, Uttar Pradesh, Madhya Pradesh and Telangana. People are facing a huge monetary crisis, with a majority of automated teller machines (ATMs) running out of cash. In Bihar's Patna several ATMs have gone 'out of service' causing inconvenience to the locals.
Taking stock of the situation, Union Finance Minister Arun Jaitley said: "We have reviewed the currency situation in the country; there is more than adequate currency circulation and it is available with the banks... a temporary shortage caused by the sudden and unusual increase in some areas is being tackled.

Here are the top developments in the crisis caused by a sudden shortage of cash across several states and what the government is saying:
1. Life gets miserable for many Indians, especially traders: Despite the currency flow in the economy going back to the pre-demonetisation level, ATMs are going dry making life miserable for many residents, especially traders. Many are running from one ATM to another in search of currency notes.

SBI gains 7% post Q2 results

STOCK MARKET - State Bank of India (SBI) has moved higher by 7% to Rs 338, bouncing back 8.5% from intra-day low on the BSE, after the bank’s assets quality in September quarter (Q2FY18) improves on sequential basis. The stock hit a low of Rs 310 in intra-day trade.

Rakesh Tarway, head of research, Reliance Securities belives the slippage ratio declining to 1.85% in Q2FY18 from 5.38% in Q1FY18 pushed the stock higher. He advises that investors stay put in the stock for now.


The bank’s gross non-performing assets (NPAs) during the quarter under review declined to 9.83%, as against 9.97% in Q1FY18. Net NPAs, too, fell to 5.43% of the net advances at the end of second quarter this fiscal, from 5.97% in the previous quarter.

Slippage ratio declined to 1.85% in Q2FY18 from 5.38% in Q1FY18, significantly improved across all segments. The bank said the special recovery teams formed at all critical processing centres and requisitioned services of retired bank officials to boost recoveries.

Net interest income (interest income minus interest expenses) grew 5.6% at Rs 18,586 crore in Q2FY18 against Rs 17,606 crore in previous quarter. The bank reported net profit of Rs 1,582 crore against Rs 2,006 crore in Q1FY18.

The trading volume in the counter more than doubled, with a combined 51.46 million shares changing hands on the BSE and NSE till 01:42 PM.

All ATM withdrawals not chargeable, SBI clarifies after furore in Kerala

Amid a public outcry in Kerala over a State Bank of India (SBI) announcement levying charges on ATM cash withdrawals from June 1, the largest public lender on Thursday clarified that the charge of Rs 25 is applicable only for withdrawals from SBI Buddy through ATMs.

"Rs 25 per transaction charge is applicable only for mobile wallet app SBI Buddy using ATM. This is applicable only for State Bank Buddy customers," the bank said here in a statement.

The clarification comes after the SBI in a notification indicated that all ATM withdrawals will be charged a fee of Rs 25, which was later replaced with the corrected notification.

The bank said that the number of free withdrawals from ATMs remained unchanged.

Jan-Dhan account holders with the SBI can avail of four free withdrawals in a month from ATMs.

Normal savings bank accounts holders will continue to get eight free ATM transactions (five from SBI ATMs plus three from other bank ATMs) in metros and 10 free transactions in non-metros (five from SBI ATMs plus five from other bank ATMs).

Earlier in the day, Kerala Finance Minister Thomas Issac told the media that the only reason he could see for this "mad" new rule was that the SBI was faced with mounting non-performing assets (NPAs) to the tune of Rs 1.67 lakh crore.

"This is height of madness and irresponsibility. It would be interesting to find out the list of NPAs of the SBI... One wouldn't be surprised if the majority (of defaulters) are found to be corporates."

"Just take a look at their (SBI) profits, it has dramatically come down. The charges have been levied to bring down their losses. This is something that even private sector banks would not dare think of doing," said Issac.
READ MORE

Cash deals worth Rs 25,000 cr move to digital mode post note ban: Survey

Latest Business News - Post demonetisation, cash-based transactions worth Rs 25,000 crore have moved to the digital mode, says a survey.

The Economic Research Department of State Bank of India carried out the survey from December 30, 2016 to January 3, 2017 so as to understand the nuances of demonetisation. It showed that 15 per cent of transactions moved to electronic payments such as m-wallets and Point of Sale machines.

"This means that Rs 25,000 crore of cash based transactions have moved to digital in the last two months. If this is so, this is a good beginning," SBI Research said in its Ecowrap report.

This number could have been even higher because the behavioural shift has not happened yet and many merchants still prefer cash transactions when the amount is not large, the survey said, adding that a number of merchants are facing connectivity issue at POS machines.

It further noted that around 69 per cent of the respondents affirmed that their businesses were impacted and the overall decline in business is less than 50 per cent for the majority of the businesses that were impacted.(Read More)

Midnight truce: Petrol pumps to accept debit and credit cards till Jan 13

Latest Business News - Petrol-pump owners on Sunday night deferred till January 13 their decision to not accept credit- and debit-card payments for fuel sales, after banks put off the move to levy a charge on every plastic transaction. 

The roll-back was announced within hours of petrol pump associations saying they would not accept card payments from Monday. The decision covers a majority of the 56,000 outlets in the country. The four banks that had said they would levy a charge on card usage at fuel pumps are HDFC Bank, Axis Bank, ICICI Bank and Punjab National Bank.

A D Sathyanarayan, president of the Consortium of India Petroleum Dealers, had earlier told this newspaper: “We have been informed by these four banks that we will be charged one per cent on all credit card transactions and between 0.25 per cent and one per cent on all debit card transactions from January 9. Reports suggest even State Bank of India is planning to charge the same. We feel banks are using this as an excuse to improve their bottom line through transactions at fuel stations. Hence, we have decided not to accept any card transactions from Monday.”

The association claims to have about 25,000 motor fuel outlets as members. Later, the All India Petroleum Dealers’ Association stated the same. Its members’ margins, it said, were fixed on a per kilolitre (kl) basis and there was no scope to absorb the new charges. Dealers say a one per cent charge would mean 30 per cent of the gross dealer margin on petrol and 40 per cent on diesel. “Our margins will be wiped out if we accept this. We have specific mechanisms to compute the margin and these do not have any scope for credit card merchant discount rates,” Sathyanarayan added.(Read More)