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SBIN:CMP: 817 Sales Gr: 15% | CYEAR GR: 26% | fy24 Result Update
(Strong Credit growth & performing Subsidiary companies made them 2nd largest Profit making company of India)
State Bank of India (SBI) is an Indian multinational public sector bank and financial services statutory body headquartered in Mumbai, Maharashtra. SBI is the 48th largest bank in the world by total assets and ranked 221st in the Fortune Global 500 list of the world's biggest corporations of 2020, being the only Indian bank on the list. It is a public sector bank and the largest bank in India with a 23% market share by assets and a 25% share of the total loan and deposits market. It is also the tenth largest employer in India with nearly 232,000 employees. In September 2022, State Bank of India became the third lender (after HDFC Bank and ICICI Bank) and seventh Indian company to cross the ₹ 5 Lakh Cr market capitalization on the Indian stock exchanges for the first time. The Reserve Bank of India (RBI) has identified the SBI, HDFC Bank, and ICICI Bank as Domestic Systemically Important Banks (D-SIBs), which are often referred to as banks that are “too big to fail”. The bank descends from the Bank of Calcutta, founded in 1806 via the Imperial Bank of India, making it the oldest commercial bank in the Indian subcontinent. The Bank of Madras merged into the other two presidency banks in British India, the Bank of Calcutta and the Bank of Bombay, to form the Imperial Bank of India, which in turn became the State Bank of India in 1955. Overall the bank has been formed from the merger and acquisition of more than twenty banks over the course of its 200-year history. The Government of India took control of the Imperial Bank of India in 1955, with Reserve Bank of India (India's central bank) taking a 60% stake, renaming it State Bank of India. In 2008, the Government of India acquired the Reserve Bank of India's stake in SBI to remove any conflict of interest because the RBI is the country's banking regulatory authority.
Combined advances of all Psu Banks last year was around 83 Lakh Cr & NPA of around 1.7%. We saw all of them coming back to Profits last year with boom Profits from huge losses when NPA were as high as 8.4% in Fy18.
SBIN with 100% Stake in SBI AMC | 70% in SBI Cards | 58% in SBI life | 70% IN SBI General Ins | Yes Bank: 31%
SBIN is managed by 2.32 Lakh employees (27% women Employees) & 50 crore client base which is more than the population of the entire USA & even 25% India. The market share in India is 23%. We have already discussed that the Merger was going to increase Profitability of PSU-Banks, and we saw the results. Last year was the 1st year for all the Psubanks coming to profits again. Due to the continuous increase in NPA, we have seen the worst time in major PSU Banks for the last few years & hence the majority of them were and are trading near fy_1995 price. The highest number of NPA has been seen in Midsize corporate 26%, the largest corporate 13% and SME with 12%. Best are retail loans with just 1.6% NPA. India moved from cash to digital as 95% of the Total transactions done in SBI during last quarter were out of the Branch transactions.
History: We saw Advances of SBI growing from 1.2 lakh Cr 20 Years back to currently 38 Lakh Cr. The growth of 18% CAGR. This helped the bank to grow their Interest income well. They even did well in Life, General Insurance, AMC, Credit Cards and other businesses and in the majority of the verticals they are No#1 or atleast at leading place in categories giving tough fights to the Private Players. This helped them grow their sales from 38000 Cr during Fy_2004 to this year crossing the landmark 5 Lakh Cr as we have been expecting. Profits 2 decades back were 3000 Cr which are at 68000 Cr and becoming 1st PSU and 2nd Indian company to cross the landmark of 50k Cr profits. Great Achievement, No Doubt. This is the best performing PsuBanks among all. As we have already said 3 years back that this year may be the starting point of the new era for SBI. As many of you are already holding this bank from 150 just 2-3 years back when the news was not good and NPA was at its peak and people were against the merger. Now those levels would be history. We have repeated many times that those buying during this time will get a huge dividend yield which would be even more then FD's.
Fy_24: Last year during the 1st half credit growth was lesser which affected overall advances and not only SBI but even Private banks and Finance companies were affected. Strong credit growth was seen from 2nd half last year & it continued for this full year with the strong credit growth of 15.2%. Strong Credit growth & performing subsidiaries helped revenue grow by 26%. The actual cost remained high for the full year due to high interest costs as borrowing cost increased by 0.90 basis points this year and increased even quarter on quarter. This affected their margin, but low provisions helped the bank to improve the profit margin. Even provisions due to Pension to employees were affected largely during this year's margin. We saw provisions down by 58%, but increased interest cost along with pension related other costs made the profit margins shrink by 50 basis points. Hence, Profit growth was just by 21% despite strong 26% sales growth. Strong growth in Profits was seen in MF, General Insurance and Caps which helped overall subsidiaries profit growth by 32%. We saw a strong decline in GNPA% from 2.78% last year to just 2.24% this year which is an improvement of 50 basis points.
Even in the coming year we may see strong 12-15% advances growth which can help sales growth of 20% and cooling off in interest rates can help profits grow by 38%. 12-15% growth is visible for this decade.
Since the last few years we have been recommending to buy near 150 now this price would be the history. New buying again can be done during any fall now near 638 and 5-10% profits can be booked during the rally near upgraded targets of 1012 this year. Still trading near the fair valuations of 11 PE. Book-Value is 364. The yield at cmp is 9.2% which is even far better than FD.
Further we may see SBI cross even landmark sales of 10 lakh Cr in FY_2028. If invested we can expect good 12%-15% long-term growth and high and consistent dividend yields. A multiyear rally should be expected and a weightage of 2% can be given in Portfolio.
DISCLOSURE: FOR EDUCATION PURPOSES, DO NOT TREAT AS A RECOMMENDATION
