1QFY2013 Result Update | Banking

August 10, 2012

State Bank of India

Performance Highlights

Particulars (` cr) NII Pre-prov. profit* PAT

Source: Company, Angel Research;

BUY
CMP Target Price
% chg (qoq) (5.0) (14.8) (7.4) 1QFY12 9,700 7,242 1,584 % chg (yoy) 14.6 12.9 136.9

`1,888 `2,270
12 Months

1QFY13 11,119 8,177 3,752

4QFY12 11,704 9,597 4,050

Investment Period
Stock Info Sector Market Cap (` cr) Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code

Banking 126,690 1.2 2475/1576 683,937 10 17,558 5,320 SBI.BO SBIN@IN

During 1QFY2013, State Bank of India (SBI) reported a standalone net profit of `3,752cr as against `1,584cr in 1QFY2012, which was in line with our estimates. The operating income growth was however lower than our expectations. A sharp surge in gross and net NPAs (up by 18.9% qoq and 28.5% qoq respectively) was the key negative. Slippages surge up significantly: During 1QFY2013, the banks advances grew by 18.9% yoy, while deposits were up by 16.1% yoy. Domestic saving deposits growth was moderate at 13.4% yoy while current account deposits declined by 2.9% yoy. The domestic NIM of the bank was lower by 42bp qoq on account of interest rate reversals, lower lending rates (SME and agri rates lowered by 50350bp effective June 01, 2012), and higher cost of deposits during the quarter (up 29bp qoq to 6.2%). The performance on the fee income front was muted with other income excluding treasury declining by 2.6% yoy. The growth in CEB income was flat yoy, while dividend income was lower at `18cr compared to `228cr in 1QFY2012 (interim dividend from subsidiaries not taken this year). On the asset-quality front, the banks annualized slippage ratio for the quarter surged sharply to 5.0%, significantly higher than 2.3% witnessed in 4QFY2012. The gross and net NPA ratio rose upwards by 18.9% and 28.5% qoq respectively. The PCR of the bank declined by 381bp qoq to 64.3%. Outlook and valuation: The asset quality of the bank has been witnessing pressure for quite some time now and with the slowdown in economic growth and persistent inflation levels pointing towards further economic stress, cyclically, the next six to nine months are likely to be challenging for the bank. However, at the current market price, the stock is trading at 1.2x FY2014E ABV (adjusting for value of subsidiaries 1.0x FY2014E ABV) vis--vis its historic range of 1.32.3x and median of 1.6x. Also, considering the banks dominant position and reach, high fee income and superior earnings quality, we feel the stock is a value buy from a 18-24 month perspective. Hence, we recommend a Buy on the stock with a target price of `2,270, though the returns are likely to be back-ended in nature. Moreover, from a value buying perspective some of SBIs peer PSU large banks are trading at relatively cheaper valuations.

Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 61.6 17.3 8.7 12.5

Abs. (%) Sensex SBI

3m 6.9 2.4

1yr 2.5 (16.9)

3yr 17.0 10.3

Key financials (standalone)

Y/E March (` cr) NII % chg Net profit % chg NIM (%) EPS (`) P/E (x) P/ABV (x) RoA (%) RoE (%) FY2011 32,526 37.4 8,265 (9.8) 3.0 130.1 14.5 2.0 0.7 13.3 FY2012 43,291 33.1 11,707 41.7 3.6 174.5 10.8 1.6 0.9 16.5 FY2013E 47,921 10.7 15,056 28.6 3.5 224.4 8.4 1.4 1.0 17.6 FY2014E 56,737 18.4 17,361 15.3 3.5 258.7 7.3 1.2 1.0 17.8

Vaibhav Agrawal
022 3935 7800 Ext: 6808 vaibhav.agrawal@angelbroking.com

Varun Varma
022 3935 7800 Ext: 6847 varun.varma@angelbroking.com

Sourabh Taparia
022 3935 7800 Ext: 6872 sourabh.taparia@angelbroking.com

Please refer to important disclosures at the end of this report

State Bank of India | 1QFY2013 Result Update

Exhibit 1: 1QFY2013 performance (standalone)

Particulars (` cr) Interest earned - on Advances / Bills - on investments - on balance with RBI & others - on others Interest Expended Net Interest Income Other income Other income excl. treasury - Fee Income - Treasury Income* - Forex Income - Others Operating income Operating expenses - Employee expenses - Other Opex Pre-provision Profit Provisions & Contingencies - Provisions for NPAs - Provisions for Investments - Provisions for Std. Assets - Other Provisions PBT Provision for Tax PAT Effective Tax Rate (%)
Source: Company, Angel Research;

1QFY13 28,917 22,135 6,373 151 258 17,798 11,119 3,499 3,278 2,603 221 457 218 14,618 6,441 4,137 2,304 8,177 2,456 2,790 (521) 169 17 5,720 1,969 3,752 34.4

4QFY12 28,696 22,141 6,205 102 248 16,992 11,704 5,264 5,290 4,216 (26) 335 739 16,968 7,371 5,431 1,940 9,597 3,140 2,837 27 375 (98) 6,456 2,406 4,050 37.3

% chg (qoq) 0.8 (0.0) 2.7 48.9 3.9 4.7 (5.0) (33.5) (38.0) (38.3) (950.0) 36.3 (70.4) (13.9) (12.6) (23.8) 18.8 (14.8) (21.8) (1.6) NA (54.9) NA (11.4) (18.2) (7.4) (285)bp

1QFY12 24,197 18,256 5,414 166 361 14,498 9,700 3,534 3,365 2,633 169 331 401 13,234 5,991 3,717 2,274 7,242 4,157 2,782 1,048 288 39 3,086 1,502 1,584 48.7

% chg (yoy) 19.5 21.2 17.7 (9.0) (28.6) 22.8 14.6 (1.0) (2.6) (1.2) 30.8 38.0 (45.5) 10.5 7.5 11.3 1.3 12.9 (40.9) 0.3 NA (41.2) NA) 85.4 31.1 136.9 (1426)bp

FY2012 106,521 81,078 23,885 414 1,144 63,230 43,291 15,221 15,271 12,091 (49) 1,432 1,748 58,512 26,069 16,974 9,095 32,443 13,960 11,546 1,533 979 (98) 18,483 6,776 11,707 36.7

FY2011 81,394 59,976 19,651 411 1,356 48,868 32,526 15,825 14,904 11,563 921 1,464 1,876 48,351 23,015 14,480 8,535 25,336 10,381 8,792 647 977 (34) 14,954 6,690 8,264 44.7

% chg 30.9 35.2 21.5 0.9 (15.6) 29.4 33.1 (3.8) 2.5 4.6 NA (2.2) (6.9) 21.0 13.3 17.2 6.6 28.1 34.5 31.3 137.1 0.2 NA 23.6 1.3 41.7 (807)bp

Exhibit 2: 1QFY2013 Actual vs Angel estimates

Particulars (` cr) Net interest income Non-interest income Operating income Operating expenses Pre-prov. profit Provisions & cont. PBT Prov. for taxes PAT
Source: Company, Angel Research

Actual 11,119 3,499 14,618 6,441 8,177 2,456 5,720 1,969 3,752

Estimates 11,959 3,921 15,880 6,763 9,117 3,731 5,386 1,747 3,638

Var (%) (7.0) (10.8) (8.0) (4.8) (10.3) (34.2) 6.2 12.7 3.1

August 10, 2012

State Bank of India | 1QFY2013 Result Update

Exhibit 3: 1QFY2013 performance analysis (standalone)

Particulars Advances (` cr) Deposits (` cr) Credit-to-Deposit Ratio (%) Current deposits (` cr) Saving deposits (` cr) CASA deposits (` cr) Reported dom. CASA ratio (%) CAR (%) Tier 1 CAR (%) Profitability Ratios (%) Cost of deposits Yield on advances Reported NIM (global) Cost-to-income ratio Asset quality Gross NPAs (` cr) Gross NPAs (%) Net NPAs (` cr) Net NPAs (%) Provision Coverage Ratio (%) Slippage ratio (%) Credit cost (%)
Source: Company, Angel Research

1QFY13 916,841 83.1 83,485 390,410 473,895 46.1 13.2 9.4 6.2 10.9 3.6 44.1 47,156 5.0 20,324 2.2 64.3 5.0 0.8

4QFY12 % chg (qoq) 1QFY12 % chg (yoy) 867,579 83.1 98,273 359,847 458,120 46.6 13.9 9.8 6.0 11.1 3.9 43.4 39,676 4.4 15,819 1.8 68.1 2.3 0.9 5.7 770,891 5.7 950,072 (0)bp (15.0) 81.1 85,971 18.9 16.1 199bp (2.9) 13.4 10.1 (175)bp 157bp 178bp 58bp 43bp (5)bp (121)bp 69.8 147bp 63.4 61bp (296)bp 173bp (7)bp

1,102,926 1,043,647

8.5 344,387 3.4 430,358 (46)bp (69)bp (41)bp 29bp (19)bp (32)bp 62bp 18.9 55bp 28.5 40bp (381)bp 268bp (3)bp 47.9 11.6 7.6 5.7 10.4 3.6 45.3 27,768 3.5 12,435 1.6 67.3 3.3 0.9

Loan book growth healthy

During 1QFY2013, the banks advances grew by 18.9% yoy, driven by a healthy 48.4% yoy growth in its international loan book (~19% in dollar terms), 25.9% yoy growth in agricultural advances and 24.0% yoy growth in large corporate loans. The growth in retail advances was however lower at 12.8% yoy on account of relatively slower y-o-y growth in home loans (13.0%) and education loans (11.0%) as compared to healthy growth of 22.5% in auto loans. The banks loan book continues to remain well diversified, with no segment accounting for more than 20% of the total loan book. Overall, deposits accretion remained reasonably healthy during 1QFY2013, registering a growth of 16.1% yoy. The domestic saving deposits growth was moderate at 13.4% yoy which coupled with a 2.9% yoy decline in volatile domestic current account deposits led to domestic CASA deposits growing at a modest pace of 10.1% yoy. The reported domestic CASA ratio as of 1QFY2013 stood at 46.1% (46.6% in 4QFY2012 and 47.9% in 1QFY2012).

August 10, 2012

State Bank of India | 1QFY2013 Result Update

Exhibit 4: Healthy credit and deposit growth

Advances YoY growth (%) 25.0 20.0 15.0 10.0 81.0 81.1 81.2 80.0 84.5 83.1 83.1 84.0 Deposits YoY growth (%) 88.0

Exhibit 5: CASA ratio declines

Reported domestic CASA ratio (%) 50.0 46.0 42.0 38.0 6.4 12.0 6.4 14.0 10.1 7.0 18.8 CASA yoy growth (%, RHS) 21.0

19.8 16.1

18.0 16.5

16.1 13.8

16.5 13.9

14.7 11.7

18.9 16.1

47.9

47.8

47.9

46.6

4QFY11 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13

Source: Company, Angel Research

76.0

46.1

5.0

34.0 30.0

1QFY12 2QFY12 3QFY12 4QFY12 1QFY13

Source: Company, Angel Research

Exhibit 6: Segment-wise advances growth

Segment Large corporate Mid-corporate SME Agri International Home Auto Education Overall advances (gross)
Source: Company, Angel Research

Exhibit 7: Loan book remains well-diversified

(%) 24.0 6.3 9.0 25.9 48.4 13.0 22.5 11.0 20.0
SME 14%
Source: Company, Angel Research

Retail 20%

Others 3%

International 15%

Agricultural 13%

MidCorporate 18% Large Corporate 15%

Overall NIMs dip by 32bp sequentially

The banks NIM decreased for domestic operation (down by 42bp qoq to 3.9%), while it increased for foreign operations (up by 24bp qoq to 1.77%). The overall NIM of the bank contracted by 32bp during the quarter to 3.6%. The domestic NIM was lower on account of interest rate reversals, lower lending rates (SME and agri rates lowered by 50-350bp effective June 01, 2012), lower demand (seasonality effect) for short term working capital loans (substituted into lower yielding CPs) and higher cost of deposits during the quarter (up 29bp qoq to 6.2%). The bank recently reduced its retail lending rates (home and auto loans) for new customers. The retail segment is currently exhibiting higher risk-adjusted returns (as experienced by private banks) and hence in our view it makes sense for SBI to try and gain market share (will be ROA accretive for the bank) in this segment by taking advantage of amongst lowest cost of funds in industry.

August 10, 2012

State Bank of India | 1QFY2013 Result Update

Exhibit 8: Overall reported NIM dips by 32bp qoq...

(%) 4.05 4.00 3.50 3.00 2.50 2.00 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 3.62 3.79 3.89 3.57

Exhibit 9: ...partly on sequentially lower domestic YoA

(%) 11.5 11.0 10.5 10.0 9.5 9.0 8.5 8.0 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13
Source: Company, Angel Research

10.78 10.43

10.93

11.05

10.86

Source: Company, Angel Research

Fee income remains muted on a y-o-y basis

The performance on the fee income front was muted with other income excluding treasury declining by 2.6% yoy. The growth in CEB income was flat y-o-y, while dividend income was lower at `18cr compared to `228cr in 1QFY2012 (interim dividend from subsidiaries not taken this year). Forex income however remained strong, growing by 38.0% yoy during 1QFY2013. According to the management, the bank has reduced its fee charges on loan processing, bank transactions and guarantees and has completely waived off charges on transactions within the bank (as per industry standard) and minimum balances on savings account leading to lower fee income.

Exhibit 10: Lower dividend income from subsidiaries

Particulars (` cr) CEB Treasury Forex Dividend Others Other income Other income excl. treasury
Source: Company, Angel Research;

1QFY13 2,603 221 457 18 200 3,499 3,278

4QFY12 4,216 (26) 335 515 224 5,264 5,290

% chg (qoq) (38.3) NA 36.3 (96.5) (10.5) (33.5) (38.0)

1QFY12 2,633 169 331 228 173 3,534 3,365

% chg (yoy) (1.2) 30.8 38.0 (92.1) 15.8 (1.0) (2.6)

Slippages surprise negatively

On the asset-quality front, the banks annualized slippage ratio for the quarter surged sharply to 5.0%, significantly higher than 2.3% witnessed in 4QFY2012. Almost 62.1% of the slippages were witnessed in the corporate and SME segments. Amongst the corporate and SME segments slippages, the major industries witnessing sequentially higher slippages were trading (`848cr vs. `56cr in 1QFY2012 and `396cr for entire FY2012), infrastructure (`787cr in 1QFY2013 vs. `554cr in 4QFY2012) and engineering (`636cr vs. `112cr in 4QFY2012).

The NPA ratios deteriorated sequentially with both gross and net NPA levels increasing on an absolute basis by 18.9% and 28.5% qoq respectively. As of 1QFY2013 the gross NPA ratio stands at 5.0% (4.4% in 4QFY2012), while the net NPA ratio stands at 2.2% (1.8% in 4QFY2012). The provisioning coverage
August 10, 2012

State Bank of India | 1QFY2013 Result Update

ratio (incl. technical write-offs) also deteriorated by 381bp during 1QFY2013 to 64.3%. The bank restructured accounts worth `564cr, taking the total
outstanding restructured book to `36,904cr (4.0% of global advances and 4.7% of domestic advances). The restructured portfolio of the associate banks stands at ~`15,000cr of which `1,200cr has slipped into NPA.

Exhibit 11: Slippages spike up in 1QFY2013

Slippages (%) 6.0 5.0 4.0 3.0 2.0 1.0 3.3 1QFY12 4.2 2QFY12 4.3 3QFY12 2.3 4QFY12 5.0 1QFY13 0.6 0.9 0.9 0.9 0.9 0.8 0.8 Credit cost (%, RHS) 1.0

Exhibit 12: NPA ratios deteriorate significantly

Gross NPAs (%) 3.5 2.8 2.1 1.4 67.3 63.5 62.5 68.1 68.0 64.3 64.0 60.0 Net NPAs (%) NPA coverage (%, RHS) 72.0

3.5 1.6

4.2 2.0

4.6 2.2

4.4 1.8

0.4

(0.0) 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13

Source: Company, Angel Research

5.0 2.2
56.0

0.7

Source: Company, Angel Research

Exhibit 13: Break-up of provisioning expenses

Particulars (` cr) NPA Standard assets Investments Others Total Provisions 1QFY13 2,790 169 (521) 17 2,456 4QFY12 2,837 375 27 (98) 3,140 % chg (qoq) (1.6) (54.9) NA NA (21.8) 1QFY12 2,782 288 1,048 39 4,157 % chg (yoy) 0.3 (41.2) NA (55.2) (40.9)

Source: Company, Angel Research;

Cost ratios remained at normalized levels

During the quarter, staff expenses increased by 11.3% yoy to `4,137cr, while other opex increased by 1.3% yoy to `2,304cr. The bank has transferred its employee fund (~`17,000cr) to an external trust which should lead to lower contribution for employees of the bank going forward. The bank added 30 branches during the quarter to bolster its already strong branch network to 14,127 branches.

August 10, 2012

State Bank of India | 1QFY2013 Result Update

Exhibit 14: Opex growth trends

Particulars (` cr) Payment to employees Contrib. for employees
Total staff expenses (A)

Exhibit 15: Cost ratios remain at normalised levels

Cost-to-income ratio (%) 46.0 45.0 44.0 43.0 42.0
45.3 46.0 43.8 43.4 44.1

% chg % chg 1QFY13 4QFY12 1QFY12 (qoq) (yoy) 3,017 805 3,821 508 266 1,646 2,420 6,242 3,055 860 3,914 529 240 1,692 2,461 6,375 (1.3) (6.4) (2.4) (3.8) 10.9 (2.7) (1.6) (2.1) 2,827 685 3,512 436 244 1,407 2,088 5,599 6.7 17.5 8.8 16.5 9.1 16.9 15.9 11.5

Opex to average assets (%, RHS) 2.2 2.3 2.2

2.1 1.9

2.0 1.9

2.1 2.0 1.9 1.8 1.7

Rent, taxes and lighting Dep. on property Others Other opex (B) Total opex (A)+(B)

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

Source: Company, Angel Research

Source: Company, Angel Research

Performance overview of subsidiaries

SBI Life reported a PAT of `163cr for 1QFY2013, (growth of 13.2% yoy). The AUM as of 1QFY2013 stood at `47,275cr. SBI Capital Markets registered a sharp 69.7% yoy decline in PAT to `26cr during 1QFY2013, reflecting the poor capital market activity. SBI Cards and Payment Services posted PAT of `10cr for 1QFY2013 which was lower by 20.6% yoy. SBI DFHI recorded PAT of `27cr (increased by 5 times on a y-o-y basis). The market share of average AUM for SBI funds management increased from 6.3% as on 4QFY2012 to 6.8% in 1QFY2013. The company recorded a PAT figure of `26cr for 1QFY2013 (growth of 36% yoy). SBIs associate banks recorded a net profit growth of 28.9% yoy of `948cr in 1QFY2013.

Investment arguments
Strong CASA franchise
SBI has a strong CASA franchise (45%+) on account of its huge nationwide branch network (14,127 as of 1QFY2013). As of 1QFY2013, the banks CASA ratio stood at 46.1%, the highest amongst all other PSU banks.

Strongest fee income among PSU banks

SBI has a relatively strong share of fee income, owing to its strong corporate and government business relationships. In FY2012, the bank continued its dominance with non-interest income/assets at 1.2% (one of the highest among PSU banks).

August 10, 2012

State Bank of India | 1QFY2013 Result Update

Investment concerns
Asset quality woes likely to continue
Asset quality pressures for the bank are likely to continue given the decelerating growth and high inflation (expected to inch up further until December 2012 at least). With interest rates hence set to remain high, there is no visible catalyst for asset quality to improve materially in the near term.

Outlook and valuation

The asset quality of the bank has been witnessing pressure for quite some time now and with economic growth slowdown and persistent inflation levels pointing towards further economic stress, cyclically, the next six to nine months are likely to be challenging for the bank. However, at the current market price, the stock is trading at 1.2x FY2014E ABV (adjusting for value of subsidiaries 1.0x FY2014E ABV) vis--vis its historic range of 1.32.3x and median of 1.6x. Also, considering the banks dominant position and reach, high fee income and superior earnings quality, we feel the stock is a value buy from a 18-24 month perspective. Hence, we recommend a Buy rating on the stock with a target price of `2,270, though the returns are likely to be back-ended in nature. Moreover, from a value buying perspective some of SBIs peer PSU large banks are trading at relatively cheaper valuations.

Exhibit 16: SOTP valuation summary

Particulars SBI Associate Banks Life Insurance Others (AMC, Cap Mkt, Factors, Cards) SOTP value
Source: Angel Research

Target multiple 1.3x FY14E ABV 0.65x-0.9x FY14E ABV 13.0x FY14ENBP

Value/share (`) 1,945 213 72 40 2,270

Exhibit 17: Key assumptions

Particulars (%) Credit growth Deposit growth CASA ratio NIMs Other income growth Growth in staff expenses Growth in other expenses Slippages
Source: Angel Research

Earlier estimates FY2013 15.0 16.0 44.6 3.6 24.7 16.0 14.0 3.4 FY2014 17.0 18.0 44.5 3.6 14.3 16.0 14.0 3.3

Revised estimates FY2013 15.0 16.0 43.9 3.5 15.5 12.0 12.0 4.0 FY2014 17.0 18.0 43.5 3.5 16.3 14.0 14.0 3.5

August 10, 2012

State Bank of India | 1QFY2013 Result Update

Exhibit 18: Change in estimates

Particulars (` cr) Net interest income Non-interest income Operating income Operating expenses Pre-prov profit Provisions & cont. PBT Prov. for taxes PAT
Source: Angel Research

FY2013 FY2014 Earlier Revised Revised Earlier Var. (%) Var. (%) estimates estimates estimates estimates 49,960 47,921 (4.1) 57,864 56,737 (1.9) 17,824 67,783 30,058 37,725 15,548 22,177 7,009 15,168 16,549 64,470 29,197 35,273 13,261 22,012 6,956 15,056 (7.2) (4.9) (2.9) (6.5) (14.7) (0.7) (0.8) (0.7) 20,344 78,208 34,660 43,548 17,606 25,942 8,212 17,730 19,203 75,940 33,285 42,655 17,259 25,396 8,035 17,361 (5.6) (2.9) (4.0) (2.0) (2.0) (2.1) (2.2) (2.1)

Exhibit 19: P/ABV band

Price (`) 5,000 4,000 3,000 2,000 1,000 0 1.0x 1.5x 2.0x 2.5x 3.0x

Feb-12
18x

Oct-09

Nov-06

May-10

Dec-10

Aug-08

Source: Company, Angel Research

Exhibit 20: P/E band

Price (`) 5,000 4,000 3,000 2,000 1,000 0
Dec-07 Jul-08 Aug-05 Apr-10 May-07 Nov-10 Aug-12 Mar-06 Oct-06 Feb-09 Sep-09 Jan-05 Jun-11 Jan-12

9x

Mar-09

12x

15x

Source: Company, Angel Research

August 10, 2012

Sep-12

Jun-07

Jan-08

Apr-06

Jul-11

State Bank of India | 1QFY2013 Result Update

Exhibit 21: Premium/Discount to Sensex

20 10 0 (10) (20) (30) (40) (50) (60) (70) Discount to Sensex Avg. Historical Discount

Dec-07

Apr-06

Apr-11

Jul-07

Mar-09

Aug-09

Oct-08

Feb-07

Nov-10

Sep-06

May-08

Source: Company, Angel Research

Exhibit 22: Angel EPS forecast vs. consensus

Year FY2013E FY2014E
Source: Bloomberg, Angel Research

Angel forecast
224.4 258.7

Bloomberg consensus
213.7 259.5

Feb-12

Sep-11

Jan-10

Jun-10

Var (%)
5.0 (0.3)

August 10, 2012

Jul-12

10

State Bank of India | 1QFY2013 Result Update

Exhibit 23: Recommendation summary

Company AxisBk FedBk HDFCBk ICICIBk* SIB YesBk AllBk AndhBk BOB BOI BOM CanBk CentBk CorpBk DenaBk IDBI# IndBk IOB J&KBk OBC PNB SBI* SynBk UcoBk UnionBk UtdBk VijBk Reco. Buy Accumulate Neutral Buy Buy Buy Neutral Neutral Buy Buy Neutral Buy Neutral Accumulate Buy Buy Accumulate Accumulate Accumulate Buy Buy Buy Buy Neutral Buy Buy Neutral CMP (`) 1,071 423 602 955 23 357 127 96 628 272 46 349 70 389 88 84 172 71 924 226 724 1,888 94 68 164 53 53 Tgt. price (`) 1,373 458 1,169 27 453 829 323 421 436 107 101 190 80 1,026 278 950 2,270 119 230 79 Upside (%) 28 8 22 16 27 32 19 20 12 21 20 11 12 11 23 31 20 26 41 47 FY2014E P/ABV (x) 1.4 1.0 3.4 1.5 0.9 1.8 0.5 0.6 0.7 0.7 0.6 0.6 0.6 0.5 0.5 0.5 0.6 0.4 0.8 0.5 0.7 1.2 0.5 0.7 0.6 0.4 0.6 FY2014E Tgt. P/ABV (x) 1.9 1.1 1.9 1.1 2.3 1.0 0.8 0.8 0.6 0.7 0.6 0.7 0.5 0.9 0.6 1.0 1.4 0.7 0.8 0.6 FY2014E P/E (x) 7.5 7.3 16.7 11.6 5.4 8.4 3.1 3.9 4.3 3.8 4.0 4.1 3.2 3.5 3.5 3.6 3.8 3.2 4.8 3.5 4.2 7.3 3.2 3.8 3.3 2.3 4.5 FY2012-14E EPS CAGR (%) 18.1 12.1 27.9 20.9 9.0 24.2 4.6 0.9 10.1 23.5 35.6 7.2 103.6 2.1 5.1 21.2 6.4 31.0 7.6 29.0 9.9 21.8 15.7 11.7 23.6 23.2 13.0 FY2014E RoA (%) 1.6 1.3 1.8 1.4 0.9 1.5 0.9 0.9 1.0 0.8 0.6 0.8 0.6 0.8 0.8 0.9 1.1 0.6 1.3 0.9 1.0 1.0 0.8 0.6 0.8 0.8 0.5 FY2014E RoE (%) 20.8 14.7 22.0 15.5 18.5 23.8 17.0 15.3 18.0 17.0 15.5 15.3 15.1 16.3 16.4 14.7 17.4 14.4 18.0 14.3 18.0 17.8 17.8 15.3 17.1 16.7 13.3

Source: Company, Angel Research; Note:*Target multiples=SOTP Target Price/ABV (including subsidiaries), #Without adjusting for SASF

Company Background
State Bank of India is the largest bank in India, with an asset size of ~ over `12lakh cr. The bank has the widest network of ~14,000 branches, with dominant presence across all regions of the country, with two-thirds of its branches in rural and semi-urban areas (in comparison, the second largest PSU bank has ~5,700 branches and the largest private sector bank has ~2,750 branches). The bank also has 173 overseas branches, which account for ~17% of its total loans. It has subsidiaries in life insurance, asset management, credit cards and capital markets, among others; and five regional subsidiary banks (having ~5,200 branches and combined asset size of ~`4.3lakh cr).

August 10, 2012

11

State Bank of India | 1QFY2013 Result Update

Income statement (standalone)

Y/E March (` cr) Net Interest Income - YoY Growth (%) Other Income - YoY Growth (%) Operating Income - YoY Growth (%) Operating Expenses - YoY Growth (%) Pre - Provision Profit - YoY Growth (%) Prov. & Cont. - YoY Growth (%) Profit Before Tax - YoY Growth (%) Prov. for Taxation - as a % of PBT PAT - YoY Growth (%) FY09 20,873 22.6 12,691 35.0 33,565 27.0 15,649 24.1 17,916 29.7 3,736 10.8 14,180 35.8 5,058 35.7 9,121 35.5 FY10 23,671 13.4 14,968 17.9 38,640 15.1 20,319 29.8 18,321 2.3 4,396 17.7 13,925 (1.8) 4,759 34.2 9,166 0.5 FY11 32,526 37.4 15,825 5.7 48,351 25.1 23,015 13.3 25,336 38.3 10,385 136.2 14,951 7.4 6,686 44.7 8,265 (9.8) FY12 43,291 33.1 14,351 (9.3) 57,643 19.2 26,069 13.3 31,574 24.6 13,090 26.1 18,483 23.6 6,776 36.7 11,707 41.7 FY13E 47,921 10.7 16,549 15.3 64,470 11.8 29,197 12.0 35,273 11.7 13,261 1.3 22,012 19.1 6,956 31.6 15,056 28.6 FY14E 56,737 18.4 19,203 16.0 75,940 17.8 33,285 14.0 42,655 20.9 17,259 30.2 25,396 15.4 8,035 31.6 17,361 15.3

Balance sheet (standalone)

Y/E March (` cr) Share Capital Reserves & Surplus Deposits - Growth (%) Borrowings Tier 2 Capital Other Liab & Prov. Total Liabilities Cash balances Bank balances Investments Advances - Growth (%) Fixed Assets Other Assets Total Assets - Growth (%) FY09 635 57,313 742,073 38.1 53,714 30,344 80,353 55,546 48,858 275,954 542,503 30.2 3,838 37,733 33.8 FY10 635 65,314 804,116 8.4 71,031 31,980 80,337 61,291 24,898 295,785 631,914 16.5 4,413 35,113 9.2 FY11 635 64,351 16.1 79,945 39,624 105,248 94,396 28,479 295,601 756,719 19.8 4,764 43,778 16.2 FY12 671 83,280 11.7 86,989 40,016 80,915 54,076 43,087 312,198 867,579 14.7 5,467 53,113 9.1 FY13E 671 95,478 16.0 100,779 46,019 93,815 48,425 49,918 383,658 15.0 6,143 61,533 15.9 FY14E 671 109,468 18.0 118,693 53,842 111,325 57,142 58,791 459,589 17.0 7,018 72,470 17.8

933,933 1,043,647 1,210,631 1,428,545

964,432 1,053,414 1,223,736 1,335,519 1,547,393 1,822,544

997,716 1,167,327

964,432 1,053,414 1,223,736 1,335,519 1,547,393 1,822,337

August 10, 2012

12

State Bank of India | 1QFY2013 Result Update

Ratio analysis (standalone)

Y/E March Profitability Ratios (%) NIMs Cost to Income Ratio RoA RoE B/S ratios (%) CASA Ratio Credit/Deposit Ratio CAR - Tier I Asset Quality (%) Gross NPAs Net NPAs Slippages Loan Loss Prov./Avg. Assets Provision Coverage Per Share Data (`) EPS ABVPS DPS Valuation Ratios PER (x) P/ABVPS (x) Dividend Yield DuPont Analysis (%) NII (-) Prov. Exp. Adj. NII Treasury Int. Sens. Inc. Other Inc. Op. Inc. Opex PBT Taxes RoA Leverage (x) RoE 2.5 0.4 2.0 0.3 2.4 1.2 3.5 1.9 1.7 0.6 1.1 17.2 18.2 2.4 0.4 1.9 0.2 2.1 1.3 3.4 2.0 1.4 0.5 0.9 17.7 15.7 2.9 0.9 2.0 0.1 2.0 1.3 3.3 2.0 1.3 0.6 0.7 19.1 13.3 3.4 1.0 2.4 (0.1) 2.3 1.2 3.5 2.0 1.4 0.5 0.9 18.8 16.5 3.3 0.9 2.4 0.0 2.4 1.1 3.5 2.0 1.5 0.5 1.0 17.4 17.6 3.4 1.0 2.4 0.0 2.4 1.1 3.5 2.0 1.5 0.5 1.0 17.8 17.8 13.1 2.3 1.5 13.1 1.9 1.6 14.5 2.0 1.6 10.8 1.6 1.9 8.4 1.4 2.3 7.3 1.2 2.6 143.7 824.2 29.0 144.4 972.5 30.0 130.1 30.0 174.5 35.0 224.4 42.5 258.7 1,574.6 49.5 967.7 1,200.1 1,332.0 2.9 1.8 2.6 0.3 39.2 3.0 1.7 2.2 0.5 59.2 3.3 1.6 2.8 0.7 65.0 4.5 1.8 3.2 0.9 68.1 5.9 2.5 4.0 0.9 65.5 6.6 2.3 3.5 1.0 70.0 41.6 73.1 14.3 9.4 47.3 78.6 13.4 9.5 49.4 81.0 12.0 7.8 44.8 83.1 13.9 9.8 43.9 82.4 13.8 9.6 43.5 81.7 13.6 9.3 2.6 46.6 1.1 18.2 2.5 52.6 0.9 15.7 3.0 47.6 0.7 13.3 3.6 45.2 0.9 16.5 3.5 45.3 1.0 17.6 3.5 43.8 1.0 17.8 FY09 FY10 FY11 FY12 FY13E FY14E

August 10, 2012

13

State Bank of India | 1QFY2013 Result Update

Research Team Tel: 022 - 39357800

E-mail: research@angelbroking.com

Website: www.angelbroking.com

DISCLAIMER
This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and risks of such an investment. Angel Broking Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within. Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's fundamentals. The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this document is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Angel Broking Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify, nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While Angel Broking Limited endeavours to update on a reasonable basis the information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so. This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced, redistributed or passed on, directly or indirectly. Angel Broking Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in the past. Neither Angel Broking Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in connection with the use of this information. Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to the latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Limited and its affiliates may have investment positions in the stocks recommended in this report.

Disclosure of Interest Statement 1. Analyst ownership of the stock 2. Angel and its Group companies ownership of the stock 3. Angel and its Group companies' Directors ownership of the stock 4. Broking relationship with company covered

State Bank of India No No No No

Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors

Ratings (Returns):

Buy (> 15%) Reduce (-5% to 15%)

Accumulate (5% to 15%) Sell (< -15%)

Neutral (-5 to 5%)

August 10, 2012

14