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					                                                                                                       3QFY2012 Result Update | Banking
                                                                                                                               February 16, 2012



 State Bank of India                                                                                 ACCUMULATE
                                                                                                     CMP                                   `2,349
 Performance Highlights                                                                              Target Price                          `2,595
  
 Particulars (` cr)           3QFY12      2QFY12       % chg (qoq)    3QFY11       % chg (yoy)       Investment Period               12 Months
 NII                           11,466      10,422             10.0       9,050            26.7
 Pre-prov. profit*              8,130       7,474               8.8      6,764            20.2       Stock Info

 PAT                            3,263       2,810             16.1       2,828            15.4       Sector                                Banking
 Source: Company, Angel Research; Note:*write back on investments netted from treasury loss          Market Cap (` cr)                     149,165
                                                                                                     Beta                                      1.1
 For 3QFY2012, SBI’s standalone net profit increased by 15.4% yoy to `3,263cr,
 which were above street estimates. Sequential expansion in both domestic (32bp)                     52 Week High / Low              2960/1576

 and foreign NIM (4bp) was the major positive from the result. However, the asset                    Avg. Daily Volume                     741,289
 quality continued to disappoint with gross and net NPA levels increasing                            Face Value (`)                            10
 sequentially by 18.1% and 16.6%, respectively. We recommend an Accumulate                           BSE Sensex                             18,154
 on the stock with a target price of `2,595.                                                         Nifty                                   5,522
 NIM improve further; asset quality continues to disappoint: During 3QFY2012,                        Reuters Code                           SBI.BO
 the bank’s net advances grew by 16.5% yoy (up 7.0% qoq), while deposits                             Bloomberg Code                    SBIN@IN
 accretion was moderate at 13.9% yoy (up 2.9% qoq). The reported CASA ratio as
 of 3QFY2012 stood at 47.9% (47.8% in 2QFY2012 and 48.2% in 3QFY2011).
 The bank’s NIM increased for both domestic (up by a strong 32bp qoq to 4.4%)                        Shareholding Pattern (%)
 and foreign operations (up by 4bp qoq to 1.8%) on account of better yields.                         Promoters                                59.4
 Adjusting for net loss on investments of `221cr, non-interest income declined                       MF / Banks / Indian Fls                  18.7
 by 9.6% yoy. On the asset-quality front, the bank’s annualised slippage ratio for                   FII / NRIs / OCBs                        10.9
 the quarter remained above 4%+ levels (4.3%). Pressure on slippages was high                        Indian Public / Others                   11.0
 from the agri, SME as well as corporate segment, while major industries
 contributing to higher slippages were aviation (`1,184cr), iron and steel (`667cr
 vs. `347cr in 2QFY2012) and textiles (`462cr vs. `289cr in 2QFY2012).                               Abs. (%)             3m        1yr        3yr
 Outlook and valuation: At the CMP, the stock is trading at 1.6x FY2013E ABV                         Sensex              (8.2)     (0.8)      95.1
 (adjusting for value of subsidiaries). The bank’s asset quality has been under                      SBI                 33.1     (14.7)     106.8
 stress lately, however the pressures are expected to ease off going forward as
 domestic macro headwinds subside. Also, considering the bank’s dominant
 position and reach, strong savings market share gains, high fee income and
 superior earnings quality, and recent impressive performances on margin front,
 we recommend an Accumulate on the stock with a target price of `2,595.
 Key financials
 Y/E March (` cr)                          FY2010        FY2011        FY2012E       FY2013E
 NII                                        23,671       32,526         43,085         49,665
 % chg                                         13.4         37.4           32.5           15.3
 Net profit                                  9,166         8,265        10,972         13,560
 % chg                                          0.5         (9.8)          32.8           23.6
 NIM (%)                                        2.5          3.0             3.5              3.5   Vaibhav Agrawal
 EPS (`)                                     144.4         130.1          172.8         203.3       022 – 3935 7800 Ext: 6808
 P/E (x)                                       16.3         18.0           13.6           11.6      vaibhav.agrawal@angelbroking.com
 P/ABV (x)                                      2.4          2.4             2.2              1.8
                                                                                                    Varun Varma
 RoA (%)                                        0.9          0.7             0.8              0.9
                                                                                                    022 – 3935 7800 Ext: 6847
 RoE (%)                                       15.7         13.3           16.9           17.5
                                                                                                    varun.varma@angelbroking.com
 Source: Company, Angel Research

Please refer to important disclosures at the end of this report                                                                                 1
                                                          State Bank of India | 3QFY2012 Result Update




                    Exhibit 1: 3QFY2012 performance
                    Particulars (` cr)                3QFY12 2QFY12          % chg (qoq) 3QFY11          % chg (yoy)
                    Interest earned                     27,661    25,967              6.5     21,413             29.2
                    - on Advances / Bills               20,891    19,789              5.6     15,717             32.9
                    - on investments                     6,413      5,853             9.6       5,157            24.4
                    - on balance with RBI & others         107         39          172.1          104             3.1
                    - on others                            250        285          (12.5)         435         (42.6)
                    Interest Expended                   16,196    15,545              4.2     12,363             31.0
                    Net Interest Income                 11,466    10,422            10.0        9,050            26.7
                    Other income                         2,996      3,427          (12.6)       3,314          (9.6)
                    Other income excl. treasury          3,216      3,399           (5.4)       3,094             4.0
                    - Fee Income                         2,642      2,600             1.6       2,477             6.6
                    - Treasury Income*                    (221)        28         (885.3)         220       (200.1)
                    - Forex Income                         286        481          (40.6)         408         (30.1)
                    - Others                               289        318           (9.1)         208            39.1
                    Operating income                    14,462    13,849              4.4     12,364             17.0
                    Operating expenses                   6,332      6,375           (0.7)       5,599            13.1
                    - Employee expenses                  3,911      3,914           (0.1)       3,512            11.4
                    - Other Opex                         2,420      2,461           (1.6)       2,088            15.9
                    Pre-provision Profit                 8,130      7,474             8.8       6,764            20.2
                    Provisions & Contingencies           3,277      3,386           (3.2)       2,052            59.7
                    - Provisions for NPAs                3,006      2,921             2.9       1,632            84.2
                    - Provisions for Investments*             -       458         (100.0)         209       (100.0)
                    - Provisions for Std. Assets           195        121           61.1          225         (13.4)
                    - Other Provisions                      76       (115)        (166.5)         (15)      (624.6)
                    PBT                                  4,853      4,089           18.7        4,713             3.0
                    Provision for Tax                    1,590      1,278           24.3        1,885         (15.7)
                    PAT                                  3,263      2,810           16.1        2,828            15.4
                    Effective Tax Rate (%)                32.8       31.3         149bp          40.0       (724)bp
                    Source: Company, Angel Research; Note:*write back on investments netted from treasury loss


                    Exhibit 2: 3QFY2012 Actual vs. Angel estimates
                    Particulars (` cr)                                   Actual             Estimates        Var (%)
                    Net interest income                                 11,466               10,793               6.2
                    Non-interest income*                                 2,996                 3,791          (21.0)
                    Operating income                                    14,462               14,584              (0.8)
                    Operating expenses                                   6,332                 6,627             (4.5)
                    Pre-prov. profit                                     8,130                 7,957              2.2
                    Provisions & cont.*                                  3,277                 3,352             (2.2)
                    PBT                                                  4,853                 4,605              5.4
                    Prov. for taxes                                      1,590                 1,492              6.5
                    PAT                                                  3,263                 3,113              4.8
                    Source: Company, Angel Research; Note:*write back on investments netted from treasury loss




February 16, 2012                                                                                                   2
                                                        State Bank of India | 3QFY2012 Result Update




                    Exhibit 3: 3QFY2012 performance analysis
                    Particulars                       3QFY12 2QFY12 % chg (qoq) 3QFY11 % chg (yoy)
                    Advances (` cr)                   846,266 790,601        7.0 726,649        16.5
                    Deposits (` cr)                1,000,965 973,171         2.9 878,979        13.9
                    Credit-to-Deposit Ratio (%)          84.5     81.2    331bp      82.7     188bp
                    Current deposits (` cr)            79,462   82,632     (3.8)   80,401       (1.2)
                    Saving deposits (` cr)            367,896 352,408        4.4 319,006        15.3
                    CASA deposits (` cr)              447,358 435,040        2.8 399,407        12.0
                    Reported CASA ratio (%)              47.9     47.8     14bp      48.2     (24)bp
                    CAR (%)                              11.6     11.4     20bp      13.2    (160)bp
                    Tier 1 CAR (%)                        7.6      7.5     12bp       9.6    (198)bp
                    Profitability Ratios (%)
                    Cost of deposits                      5.9      5.8      7bp       5.2      70bp
                    Yield on advances                    10.9     10.8     15bp       9.6     135bp
                    Reported NIM (global)                 4.1      3.8     26bp       3.6      44bp
                    Cost-to-income ratio                 43.8     46.0   (225)bp     45.3    (150)bp
                    Asset quality
                    Gross NPAs (` cr)                  40,098   33,946     18.1    23,438       71.1
                    Gross NPAs (%)                        4.6      4.2     42bp       3.2     144bp
                    Net NPAs (` cr)                    18,803   16,120     16.6    11,695       60.8
                    Net NPAs (%)                          2.2      2.0     18bp       1.6      61bp
                    Provision Coverage Ratio (%)         62.5     63.5    (98)bp     64.1    (155)bp
                    Slippage ratio (%)                    4.3      4.2      8bp       1.9     246bp
                    Credit cost (%)                       0.9      0.9      1bp       0.6      36bp
                    Source: Company, Angel Research


                    Loan growth healthy

                    During 3QFY2012, the bank’s net advances grew by 16.5% yoy (up 7.0% qoq),
                    underpinned by healthy 21.3% yoy growth in SME advances, 21.3% yoy growth in
                    international loan book and 17.1% yoy growth in agriculture advances. Growth in
                    retail advances was however lower at 11.9% yoy on account of relative slower
                    disbursements of home loans (up 16.5% yoy) since withdrawal of dual rate loans
                    (22.4% yoy growth in December 2010) by the bank.

                    The bank’s loan book continues to be well diversified, with no segment accounting
                    for more than 20% of the total loan book. The management has guided for ~16%
                    loan growth for FY2012.

                    For 3QFY2012, deposits accretion was moderate at 13.9% yoy (up 2.9% qoq). The
                    saving account deposits growth was reasonably healthy at 15.3% yoy (up 4.4%
                    qoq), however the more volatile current account deposits declined by 1.2% yoy
                    (down 3.8% yoy). The reported CASA ratio as of 3QFY2012 stood at 47.9%
                    (47.8% in 2QFY2012 and 48.2% in 3QFY2011)




February 16, 2012                                                                                  3
                                                                                              State Bank of India | 3QFY2012 Result Update




Exhibit 4: YoY business growth                                              Exhibit 5: CASA growth trends
            Advances YoY growth (%)          Deposits YoY growth (%)                      CASA ratio (%)            CASA yoy growth (%, RHS)
25.0                                                                 88.0    50.0                                                                    28.0

                                                        84.5                                             24.2
20.0                                                                         46.0
                                                                                                                                                     21.0
                    82.7                                             84.0                   20.6                        18.8
15.0                                                                         42.0
                             81.0     81.1     81.2                                                                                            12.0 14.0
10.0        79.6                                                             38.0
                                                                     80.0                                                             6.4
                                                                                                                                                     7.0
  5.0                                                                        34.0
          19.0
          10.7

                    21.3
                    14.0

                             19.8
                             16.1

                                      18.0
                                      16.5

                                               16.1
                                               13.8

                                                        16.5
                                                        13.9
                                                                                       48.2           48.7       47.9          47.8          47.9
                                                                             30.0                                                                    -
   -                                                                 76.0
        2QFY11 3QFY11 4QFY11 1QFY12 2QFY12 3QFY12                                    3QFY11        4QFY11       1QFY12    2QFY12            3QFY12


Source: Company, Angel Research                                             Source: Company, Angel Research



Exhibit 6: Segment-wise advances growth                                     Exhibit 7: Well-diversified loan book
Segment                                                        (%)                                      Others                 International
Large corporate                                              20.9                                        4%                        15%
                                                                                             Retail
Mid-corporate                                                11.7                             20%
SME                                                          21.3
Agri                                                         17.1                                                                         Mid-
                                                                                                                                        Corporate
International                                                21.3                   Agricultural                                          19%
Home                                                         16.3                      12%
Auto                                                         24.2                                                                 Large
Education                                                    14.1                                                                Corporate
                                                                                                       SME
                                                                                                                                   14%
Overall advances (net)                                       16.5                                      15%

Source: Company, Angel Research                                             Source: Company, Angel Research


                                                      Margins continue to impress
                                                      The bank’s NIM increased for both domestic (up by a strong 32bp qoq to 4.4%)
                                                      and foreign operations (up by 4bp qoq to 1.8%) on account of better yields. The
                                                      yield on advances for the bank as a whole rose by 15bp to 10.9% while cost of
                                                      deposits increased by a relatively lesser 7bp to 5.9%, leading to 26bp expansion in
                                                      reported NIM (global operations).

                                                      The management cited continued focus on pricing rather than chasing balance
                                                      sheet growth as the key reason behind the recent strong performances on the
                                                      margin front. As of 3QFY2012, the bulk deposits only stand at ~12% of the
                                                      overall book and the management intends to lower this proportion even further
                                                      going ahead.

                                                      The bank’s overall loan book is majorly skewed towards floating rate loans
                                                      (~85%) and hence with the onset of the reversal in interest rate cycle, downward
                                                      loan re-pricing could lead to marginal erosion in NIM for the bank, going ahead.




February 16, 2012                                                                                                                                          4
                                                                                     State Bank of India | 3QFY2012 Result Update




Exhibit 8: Reported NIM rises by 26bp qoq...                        Exhibit 9: ...primarily due to higher yield on advances
  (%)                                                                 (%)
                                                        4.05                                                                      10.93
                                                                      11.0                                            10.78
4.00                                        3.79
           3.61                    3.62                                                                  10.43
                                                                      10.5
3.50
                       3.07                                           10.0
                                                                                 9.58        9.56
3.00
                                                                       9.5

2.50                                                                   9.0

2.00                                                                   8.5
         3QFY11      4QFY11       1QFY12   2QFY12      3QFY12                  3QFY11      4QFY11       1QFY12       2QFY12       3QFY12

Source: Company, Angel Research                                     Source: Company, Angel Research


                                               Weak performance on non-interest income front

                                               The non-interest income of the bank declined by 35.8% yoy to `2,126cr,
                                               primarily on account of sale of loss-making investments (`1,090cr) during the
                                               quarter. Adjusting for net loss on investments of `221cr, non-interest income
                                               declined by 9.6% yoy. The growth in CEB income was moderate during
                                               3QFY2012 at 1.6% qoq (6.6% yoy), however the forex income was weak at
                                               `286cr, down 40.6% qoq, while dividend income also came in lower by
                                               37.0% qoq to `53cr.

                                               Exhibit 10: Weak performance on non-interest income front
                                               Particulars (` cr)             3QFY12      2QFY12      % chg (qoq)    3QFY11       % chg (yoy)
                                               CEB                               2,642      2,600              1.6      2,477                6.6
                                               Treasury*                         (221)          28         (885.3)        220         (200.1)
                                               Forex                               286        481           (40.6)        408          (30.1)
                                               Dividend                             53          84          (37.0)            -             (NA)
                                               Others                              236        234              0.9        208               13.6
                                               Other income                      2,996      3,427           (12.6)      3,314           (9.6)
                                               Other income excl. treasury       3,216      3,399            (5.4)      3,094                4.0

                                               Source: Company, Angel Research; Note:*write back on investments netted from treasury loss


                                               Slippages remain elevated

                                               The bank booked losses in its investment book during 3QFY2012, primarily on
                                               account of sale of loss-making equities (`1,063cr) during the quarter. However,
                                               the benefit resulted in write back of provisions of `867cr during 3QFY2012, which
                                               led to overall provisions increasing by a relatively smaller 17.3% yoy to `2,407cr.
                                               Removing for this one-off the increase was sharper at 59.7% yoy to `3,277cr. The
                                               loan-loss provisioning was higher at `3,006cr, an increase of 84.2% yoy over
                                               `1,632 levels registered in 3QFY2011.

                                               On the asset-quality front, the bank’s annualised slippage ratio for the quarter
                                               remained above 4%+ levels (4.3%). Pressure on slippages was high from the agri,
                                               SME as well as corporate segments, with slippages from the corporate segment
                                               rising sharply from `2,454cr in 2QFY2012 (`1,716cr in 1QFY2012) to `3,948cr
                                               (slippage ratio of 5.5% and 48.4% of overall slippages) for 3QFY2012. SME
                                               segment’s slippages declined on a qoq basis however were still above comfort

February 16, 2012                                                                                                                              5
                                                                                              State Bank of India | 3QFY2012 Result Update




                                                    levels at `2,078cr (slippage ratio of 6.3% and 25.5% of overall slippages). Agri
                                                    slippages were high at 4.4% for 3QFY2012 (8.4% in 2QFY2012 on account of
                                                    chunky slippages), however they declined significantly by 43.9% qoq during
                                                    3QFY2012 to `1,126cr.

                                                    Amongst the corporate and SME segments slippages, major industries contributing
                                                    to higher slippages were aviation (`1,184cr), iron and steel (`667cr vs. `347cr in
                                                    2QFY2012) and textiles (`462cr vs. `289cr in 2QFY2012). The NPA ratios
                                                    continued to disappoint with gross and net NPA levels increasing by 18.1%
                                                    and 16.6% qoq, respectively. As of 3QFY2012 gross NPA ratio stands at 4.6%
                                                    (4.2% in 2QFY2012), while net NPA ratio stands at 2.2% (2.0% in
                                                    2QFY2012). The provisioning coverage ratio deteriorated by 98 bp during
                                                    3QFY2012 to 62.5%.

                                                    The bank restructured accounts worth `2,188cr during 3QFY2012 taking the total
                                                    restructured book to `37,610cr. The slippages from the restructured book during
                                                    3QFY2012 stood at `1,932cr.

                                                    The management indicated that they have switched to credit guarantee scheme in
                                                    respect of SME lending and hence expect improvement in SME NPAs going
                                                    forward. Also the management hinted at peaking out of agri NPAs and subsequent
                                                    reduction in slippages from this segment going ahead.



Exhibit 11: Slippages remain elevated                                     Exhibit 12: Gross NPAs remain above 4% levels
                  Slippages (%)         Credit cost (%, RHS)                        Gross NPAs (%)       Net NPAs (%)       NPA coverage (%, RHS)
  5.0                 1.1                                        1.2         3.5                             67.3                              68.0
                                  0.9       0.9        0.9
  4.0                                                                        2.8
                                                                 0.9                              65.0
  3.0      0.6                                                               2.1       64.1
                                                                                                                         63.5
                                                                 0.6                                                                           64.0
  2.0                                                                        1.4                                                    62.5

                                                                 0.3
  1.0                                                                        0.7
                                                                                       3.2
                                                                                       1.6


                                                                                                 3.3
                                                                                                 1.6


                                                                                                            3.5
                                                                                                            1.6


                                                                                                                         4.2
                                                                                                                         2.0


                                                                                                                                    4.6
                                                                                                                                    2.2

           2.0        3.6         3.3       4.2        4.3
   -                                                             -          (0.0)                                                              60.0
         3QFY11     4QFY11    1QFY12     2QFY12     3QFY12                           3QFY11 4QFY11 1QFY12 2QFY12 3QFY12


Source: Company, Angel Research                                           Source: Company, Angel Research




                                                    Exhibit 13: Break-up of provisioning expenses
                                                     Particulars (` cr)       3QFY12          2QFY12      % chg (qoq)      3QFY11          % chg (yoy)
                                                     NPA                           3,006       2,921              2.9           1,632             84.2
                                                     Standard assets                195          121             61.1            225            (13.4)
                                                     Investments*                      -         458          (100.0)            209          (100.0)
                                                     Others                           76        (115)         (166.5)            (15)         (624.6)
                                                     Total Provisions              3,277       3,385             (3.2)          2,052             59.7
                                                     Source: Company, Angel Research; Note:*write back on investments netted from treasury loss




February 16, 2012                                                                                                                                     6
                                                                                                     State Bank of India | 3QFY2012 Result Update




                                                    Cost ratios remain normalized levels

                                                    During the quarter, staff expenses declined by 2.4% qoq (up 8.8% yoy), while other
                                                    opex declined by 1.6% qoq (up 15.9% yoy). The management indicated employee
                                                    expenses to stay under control going forward as lower salaried employees replace
                                                    annual retires every year (~ 4,000 annual retirements).


Exhibit 14: Opex growth trends                                            Exhibit 15: Cost ratios remain at normalised levels
                                         % chg        % chg
Particulars (` cr)         3QFY12 2QFY12       3QFY11                                 Cost-to-income ratio (%)               Opex to average assets (%, RHS)
                                         (qoq)         (yoy)
Payment to employees        3,017   3,055   (1.3)     2,827    6.7          55.0                          2.3                                           2.4
                                                                                                                                                        2.3
Contrib. for employees        805    860    (6.4)      685    17.5
                                                                                                                                                        2.2
Total staff expenses (A)    3,821   3,914   (2.4)     3,512    8.8          50.0
                                                                                                                                    2.0                 2.1
                                                                                           2.0                                                 2.0
Rent, taxes and lighting      508    529    (3.8)      436    16.5                                                   1.9                                2.0
Dep. on property              266    240    10.9       244     9.1          45.0
                                                                                                                                                        1.9
Others                      1,646   1,692   (2.7)     1,407   16.9                                                                                      1.8
                                                                                          45.3           52.8       45.3           46.0       46.6
Other opex (B)              2,420   2,461   (1.6)     2,088   15.9          40.0                                                                        1.7
                                                                                        3QFY11 4QFY11 1QFY12 2QFY12 3QFY12
Total opex (A)+(B)          6,242   6,375   (2.1)     5,599   11.5

Source: Company, Angel Research                                           Source: Company, Angel Research


                                                    Capital infusion to boost tier-I ratio

                                                    The tier-I ratio as of 3QFY2012 stood at a low 7.6% (3QFY2012 profits not
                                                    included). The bank has received the approval of government of capital infusion of
                                                    `7,900cr by means of preferential allotment of equity shares. According to the
                                                    management, capital infusion of `7,900cr and addition of FY2012 profits is
                                                    expected to propel the tier-I ratio of the bank from the current 7.6% levels to 9.0%
                                                    by FY2012 end.

                                                    Exhibit 16: Capital infusion of boost tier-I ratio

                                                       (%)                                   Tier I CAR (%)        Tier II CAR (%)
                                                       16.0
                                                                13.4         13.5          13.2          13.2
                                                                                                                   12.0          11.6      11.4      11.6
                                                       12.0      3.9         3.8           3.6            3.6
                                                                                                                    4.2           4.0       3.9       4.0
                                                        8.0

                                                                 9.5         9.8           9.6            9.6
                                                        4.0                                                         7.8           7.6       7.5       7.6

                                                         -
                                                                 4QFY10



                                                                             1QFY11



                                                                                            2QFY11



                                                                                                          3QFY11



                                                                                                                    4QFY11



                                                                                                                                  1QFY12



                                                                                                                                            2QFY12



                                                                                                                                                      3QFY12




                                                    Source: Company, Angel Research




February 16, 2012                                                                                                                                              7
                                                      State Bank of India | 3QFY2012 Result Update




                    Performance overview of subsidiaries
                        SBI Life reported PAT of `265cr for 3QFY2012, (decline of 12.0% yoy). The
                        AUM as of 3QFY2012 stood at `41,186cr

                        SBI Capital Markets registered a sharp 48.4% yoy decline in PAT to `166cr
                        during 3QFY2012, reflecting the poor capital market activity.

                        SBI Cards and Payment Services posted PAT of `34cr against a loss of 0.2cr in
                        3QFY2011.

                        SBI DFHI recorded PAT of `31cr.

                        SBI Funds Management’s average AUM as of 3QFY2012 stood at `41,552cr
                        (`41,498 in 3QFY2011). The company recorded a PAT figure of `53cr for
                        3QFY2012.

                        SBI Pension Fund’s AUM grew by 52.7% yoy to `5,182cr.

                        During 3QFY2012, the overall SBI Group recorded a 16.4% yoy increase in
                        net profit to `4,318cr.


                    Investment arguments
                    Improving savings market share

                    Until FY2007, the bank witnessed a significant decline in CASA market share with
                    private sector banks pursuing aggressive branch expansion. However, the bank’s
                    market share of savings deposits has expanded substantially by 320bp to 25.5%
                    during FY2007–11 (one of the few PSBs to do so), driven by relatively faster branch
                    expansion (9.1% CAGR vs. 2–5% for most PSBs), leveraging its tremendous trust
                    factor in the country. Even during FY2011, the bank added over 1,000 branches to
                    further bolster its already strong branch network to 13,542 branches.

                    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 9MFY2012, the bank continued its
                    dominance with non-interest income/assets at 1.1% (the highest among PSU
                    banks).


                    Outlook and valuation

                    We expect SBI to outperform on account of its stronger core competitiveness and
                    likelihood of credit and CASA market share gains, driven by strong capital
                    adequacy and robust branch network of more than 13,500 branches. The bank’s
                    sustainable CASA ratio of 45%+ is expected to lead to relatively stronger earnings
                    growth in a rising interest rate environment.

                    Due to strong CASA market share gains and high fee income, SBI’s core RoEs have
                    improved over the past few years and, unlike most other PSBs, actual FY2011 RoEs
                    are below core levels due to low asset yields, providing scope for upside as yields
                    normalise to sectoral averages. We believe, going forward, SBI has ample levers to



February 16, 2012                                                                                    8
                                                       State Bank of India | 3QFY2012 Result Update




                    deliver healthy operating income growth even in a rising interest rate environment
                    as well as manage its provisioning requirements.

                    At the CMP, the stock is trading at 1.6x FY2013E ABV (adjusting for value of
                    subsidiaries). The bank’s asset quality has been under stress lately, however the
                    pressures are expected to ease off going forward as domestic macro headwinds
                    subside. Also, considering the bank’s dominant position and reach, strong savings
                    market share gains, high fee income and superior earnings quality, and recent
                    impressive performances on margin front, we recommend an Accumulate on the
                    stock with a target price of `2,595.


                    Exhibit 17: SOTP valuation summary
                    Particulars                                                Target multiple       Value/share (`)
                    SBI                                                  1.75x FY13E ABV                      2,206
                    Associate Banks                                        1.0x FY13E ABV                       241
                    Life Insurance                                                 15.0x NBP                     99
                    Others (AMC, Cap Mkt, Factors, Cards)                                                        50
                    SOTP value                                                                                2,595
                    Source: Angel Research


                    Exhibit 18: Key assumptions
                                                                     Earlier estimates           Revised estimates
                    Particulars (%)
                                                                 FY2012           FY2013         FY2012     FY2013
                    Credit growth                                      14.0          14.0          17.0        17.0
                    Deposit growth                                     15.0          17.0          14.0        17.0
                    CASA ratio                                         50.4          50.6          49.5        48.7
                    NIMs                                                3.4           3.4           3.5         3.5
                    Other income growth                                (2.5)         16.3         (12.6)       20.3
                    Growth in staff expenses                           13.0          17.0          10.0        17.0
                    Growth in other expenses                           22.0          17.0          17.0        17.0
                    Slippages                                           3.7           3.7           3.8         3.5
                    Source: Angel Research


                    Exhibit 19: Change in estimates
                                                          FY2012                        FY2013
                    Particulars (` cr)            Earlier   Revised             Earlier   Revised
                                                                    Var. (%)                      Var. (%)
                                               estimates estimates           estimates estimates
                    Net interest income         42,153      43,085         2.2       48,737        49,665       1.9
                    Non-interest income         15,473      13,915      (10.1)       17,965        16,703      (7.0)
                    Operating income            57,626      57,000        (1.1)      66,702        66,368      (0.5)
                    Operating expenses          26,776      25,914        (3.2)      31,327        30,320      (3.2)
                    Pre-prov profit             30,850      31,086         0.8       35,375        36,048       1.9
                    Provisions & cont.          14,576      14,412        (1.1)      16,151        16,178       0.2
                    PBT                         16,274      16,674         2.5       19,224        19,870       3.4
                    Prov. for taxes              5,562       5,701         2.5         6,100        6,310       3.4
                    PAT                         10,713      10,972         2.4       13,124        13,560       3.3
                    Source: Angel Research




February 16, 2012                                                                                                    9
                                                                                                State Bank of India | 3QFY2012 Result Update




                    Exhibit 20: P/ABV band
                                         Price (`)                      1.0x                              1.5x                     2.0x                          2.5x                        3.0x

                    4,000



                    3,000



                    2,000



                    1,000



                           0




                                                                                                                                                                  Dec-10


                                                                                                                                                                                    Jul-11
                                Apr-06




                                                                                                Aug-08




                                                                                                                                 Oct-09
                                                                                                                  Mar-09




                                                                                                                                                                                                       Feb-12
                                              Nov-06


                                                            Jun-07




                                                                                                                                               May-10
                                                                              Jan-08
                    Source: Company, Angel Research


                    Exhibit 21: P/E band
                                                                Price (`)                          9x                      12x                 15x                         18x
                    4,000


                    3,000


                    2,000


                    1,000


                           0
                                                                                                         Dec-07


                                                                                                                       Jul-08




                                                                                                                                                                  Apr-10
                                           Aug-05


                                                       Mar-06


                                                                     Oct-06




                                                                                                                                     Feb-09


                                                                                                                                                 Sep-09




                                                                                                                                                                                    Nov-10
                                                                                       May-07




                                                                                                                                                                                                 Jun-11
                               Jan-05




                                                                                                                                                                                                                Jan-12
                    Source: Company, Angel Research


                    Exhibit 22: Premium/Discount to Sensex
                                                                     Discount to Sensex                                               Avg. Historical Discount
                     30
                     20
                     10
                      0
                    (10)
                    (20)
                    (30)
                    (40)
                    (50)
                    (60)
                    (70)
                                                                              Dec-07


                                                                                                 Jul-08




                                                                                                                                                        Apr-10
                           Mar-06


                                           Oct-06




                                                                                                                     Feb-09


                                                                                                                                      Sep-09




                                                                                                                                                                           Nov-10
                                                          May-07




                                                                                                                                                                                              Jun-11


                                                                                                                                                                                                                Jan-12




                    Source: Company, Angel Research




February 16, 2012                                                                                                                                                                                                  10
                                                                                               State Bank of India | 3QFY2012 Result Update




                                                       Exhibit 23: Angel EPS forecast vs. consensus
                                                       Year                                Angel forecast      Bloomberg consensus         Var (%)
                                                       FY2012E                                  172.8                 170.6                    1.3
                                                       FY2013E                                  203.3                 218.2                   (6.8)
                                                       Source: Bloomberg, Angel Research


Exhibit 24: Recommendation summary
                                CMP      Tgt. price    Upside     FY2013E         FY2013E       FY2013E       FY2011-13E       FY2013E     FY2013E
Company       Reco.
                                  (`)            (`)      (%)     P/ABV (x)   Tgt P/ABV (x)       P/E (x)    EPS CAGR (%)       RoA (%)     RoE (%)
AxisBk        Buy              1,223        1,733       41.7           2.0             2.8         10.6             18.2           1.5        20.2
FedBk         Neutral            442              -           -        1.2                 -         9.5               16.2          1.2      13.2
HDFCBk        Neutral            526              -           -        3.6                 -        18.3               30.4          1.8      21.0
ICICIBk*      Buy                969        1,193       23.2           1.8              2.2         15.2               19.5          1.4      14.5
SIB           Neutral             28              -           -        1.3                 -         8.3               13.5          0.9      17.5
YesBk         Buy                366           462      26.1           2.3              2.9         12.1               20.1          1.4      20.6
AllBk         Accumulate         193           208        7.8          0.9              1.0          5.4                9.1          0.9      17.3
AndhBk        Neutral            129              -           -        0.9                 -         6.0               (2.9)         0.9      15.1
BOB           Accumulate         863           979      13.4           1.2              1.4          6.6                9.8          1.1      19.3
BOI           Neutral            386              -           -        1.2                 -         8.1                2.3          0.6      13.7
BOM           Accumulate          57            63      10.9           0.8              0.9          5.4               31.2          0.7      16.9
CanBk         Accumulate         550           578        5.1          1.1              1.2          7.1               (7.4)         0.8      15.8
CentBk        Reduce             108            95     (11.7)          1.0              0.9          6.9             (25.1)          0.4      11.4
CorpBk        Accumulate         511           570      11.4           0.9              1.0          5.6               (1.8)         0.8      15.5
DenaBk        Accumulate          96           109      12.9           0.7              0.8          4.6                7.3          0.8      16.1
IDBI#         Neutral            116              -           -        0.8                 -         5.8                8.9          0.6      13.4
IndBk         Neutral            248              -           -        1.0                 -         5.9                3.6          1.2      18.2
IOB           Neutral            105              -           -        0.7                 -         5.5                5.3          0.5      12.8
J&KBk         Neutral            867              -           -        0.9                 -         5.0               16.7          1.4      19.0
OBC           Neutral            302              -           -        0.8                 -         6.6               (5.9)         0.7      11.3
PNB           Accumulate       1,053        1,165       10.6           1.2              1.4          6.7                6.4          1.0      19.4
SBI*          Accumulate       2,349        2,595       10.5           1.8              2.0         11.6               25.0          0.9      17.5
SynBk         Accumulate         116           129      11.0           0.8              0.9          4.9               13.7          0.7      16.5
UcoBk         Neutral             88              -           -        1.1                 -         5.7               10.9          0.6      15.4
UnionBk       Neutral            257              -           -        1.1                 -         6.5                0.1          0.7      15.8
UtdBk         Accumulate          83            89        6.8          0.7              0.8          4.7               15.3          0.6      14.4
VijBk         Reduce              67            57     (14.5)          0.9              0.8          7.5                0.7          0.4      11.1
                                                                                                        #
Source: Company, Angel Research; Note:*Target multiples=SOTP Target Price/ABV (including subsidiaries), Without adjusting for SASF




February 16, 2012                                                                                                                               11
                                                               State Bank of India | 3QFY2012 Result Update




                    Income statement
                    Y/E March (` cr)                   FY08          FY09       FY10            FY11          FY12E     FY13E
                    Net Interest Income           17,021        20,873        23,671           32,526        43,085     49,665
                    - YoY Growth (%)                   13.0          22.6           13.4         37.4          32.5       15.3
                    Other Income                   9,398        12,691        14,968           15,825        13,915     16,703
                    - YoY Growth (%)                   26.9          35.0           17.9             5.7      (12.1)      20.0
                    Operating Income              26,420        33,565        38,640           48,351        57,000     66,368
                    - YoY Growth (%)                   17.6          27.0           15.1         25.1          17.9       16.4
                    Operating Expenses            12,609        15,649        20,319           23,015        25,914     30,320
                    - YoY Growth (%)                    6.6          24.1           29.8         13.3          12.6       17.0
                    Pre - Provision Profit        13,811        17,916        18,321           25,336        31,086     36,048
                    - YoY Growth (%)                   29.8          29.7            2.3         38.3          22.7       16.0
                    Prov. & Cont.                  3,373         3,736          4,396          10,385        14,412     16,178
                    - YoY Growth (%)                   11.8          10.8           17.7        136.2          38.8       12.3
                    Profit Before Tax             10,438        14,180        13,925           14,951        16,674     19,870
                    - YoY Growth (%)                   36.9          35.8           (1.8)            7.4       11.5       19.2
                    Prov. for Taxation             3,709         5,058          4,759           6,686         5,701      6,310
                    - as a % of PBT                    35.5          35.7           34.2         44.7          34.2       31.8
                    PAT                            6,729         9,121          9,166           8,265        10,972     13,560
                    - YoY Growth (%)                   48.2          35.5            0.5         (9.8)         32.8       23.6



                    Balance sheet
                     Y/E March (` cr)          FY08           FY09          FY10             FY11           FY12E       FY13E
                     Share Capital              631           635            635              635             635         667
                     Reserves & Surplus       48,401     57,313         65,314              64,351          72,609      90,526
                     Deposits                537,404 742,073           804,116         933,933 1,064,683 1,245,680
                     - Growth (%)               23.4          38.1            8.4             16.1            14.0        17.0
                     Borrowings               51,727     53,714         71,031              79,945          83,654      98,257
                     Tier 2 Capital           21,289     30,344         31,980              39,624          46,360      54,241
                     Other Liab & Prov.       62,073     80,353         80,337         105,248             117,552     137,134
                     Total Liabilities       721,526 964,432 1,053,414 1,223,736 1,385,493 1,626,504
                     Cash balances            51,535     55,546         61,291              94,396          69,204      80,969
                     Bank balances            15,932     48,858         24,898              28,479          41,361      48,582
                     Investments             189,501 275,954           295,785         295,601             334,748     396,878
                     Advances                416,768 542,503           631,914         756,719             885,362 1,035,873
                     - Growth (%)               23.5          30.2           16.5             19.8            17.0        17.0
                     Fixed Assets              3,373      3,838             4,413            4,764           5,234       5,963
                     Other Assets             44,417     37,733         35,113              43,778          49,584      58,239
                     Total Assets            721,526 964,432 1,053,414 1,223,736 1,385,493 1,626,504
                     - Growth (%)               27.3          33.8            9.2             16.2            13.3        17.5




February 16, 2012                                                                                                          12
                                                   State Bank of India | 3QFY2012 Result Update




                    Ratio analysis
                     Y/E March                      FY08   FY09    FY10    FY11    FY12E    FY13E
                     Profitability Ratios (%)
                     NIMs                            2.8     2.6     2.5     3.0     3.5       3.5
                     Cost to Income Ratio           47.7    46.6    52.6    47.6    45.5     45.7
                     RoA                             1.0     1.1     0.9     0.7     0.8       0.9
                     RoE                            18.1    18.2    15.7    13.3    16.9     17.5
                     B/S ratios (%)
                     CASA Ratio                     47.0    41.6    47.3    49.4    49.5     48.7
                     Credit/Deposit Ratio           77.6    73.1    78.6    81.0    83.2     83.2
                     CAR                            13.5    14.3    13.4    12.0    12.2     12.8
                     - Tier I                        9.1     9.4     9.5     7.8     7.7       8.2
                     Asset Quality (%)
                     Gross NPAs                      3.0     2.9     3.0     3.3     4.8       5.8
                     Net NPAs                        1.8     1.8     1.7     1.6     2.1       2.1
                     Slippages                       2.3     2.6     2.2     2.8     3.8       3.5
                     Loan Loss Prov./Avg. Assets     0.3     0.3     0.5     0.7     0.9       1.0
                     Provision Coverage             42.2    39.2    59.2    65.0    65.0     70.0
                     Per Share Data (`)
                     EPS                           106.6   143.7   144.4   130.1   172.8    203.3
                     ABVPS                         709.7   824.2   972.5   967.6 1,068.3   1,313.1
                     DPS                            21.5    29.0    30.0    30.0    32.5     38.5
                     Valuation Ratios
                     PER (x)                        22.0    16.4    16.3    18.0    13.6     11.6
                     P/ABVPS (x)                     3.3     2.9     2.4     2.4     2.2       1.8
                     Dividend Yield                  0.9     1.2     1.3     1.3     1.4       1.6
                     DuPont Analysis (%)
                     NII                             2.7     2.5     2.4     2.9     3.3       3.3
                     (-) Prov. Exp.                  0.5     0.4     0.4     0.9     1.1       1.1
                     Adj. NII                        2.1     2.0     1.9     2.0     2.2       2.2
                     Treasury                        0.3     0.3     0.2     0.1     0.0       0.0
                     Int. Sens. Inc.                 2.4     2.4     2.1     2.0     2.2       2.3
                     Other Inc.                      1.2     1.2     1.3     1.3     1.0       1.1
                     Op. Inc.                        3.6     3.5     3.4     3.3     3.3       3.3
                     Opex                            2.0     1.9     2.0     2.0     2.0       2.0
                     PBT                             1.6     1.7     1.4     1.3     1.3       1.3
                     Taxes                           0.6     0.6     0.5     0.6     0.4       0.4
                     RoA                             1.0     1.1     0.9     0.7     0.8       0.9
                     Leverage (x)                   17.5    17.2    17.7    19.1    20.8     19.9
                     RoE                            18.1    18.2    15.7    13.3    16.9     17.5




February 16, 2012                                                                              13
                                                                                        State Bank of India | 3QFY2012 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
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  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
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  Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and
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  Disclosure of Interest Statement                                          State Bank of India
  1. Analyst ownership of the stock                                                  No
  2. Angel and its Group companies ownership of the stock                            No
  3. Angel and its Group companies' Directors ownership of the stock                 Yes
  4. Broking relationship with company covered                                       No

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


  Ratings (Returns):              Buy (> 15%)                            Accumulate (5% to 15%)                     Neutral (-5 to 5%)
                                  Reduce (-5% to 15%)                    Sell (< -15%)


February 16, 2012                                                                                                                          14