· SIB's Loan book grew steadily (8.3%YoY, 2.9%QoQ) to INR 420bn in 1QFY17 led by growth in SME & Agriculture (22%YoY, 2.8%QoQ) and Retail (16.6%YoY). Corporate loan book registered de-growth of 2%YoY and 0.6%QoQ. Management has guided a 20% growth in Retail loan book and clocking an overall loan book growth of ~17% in FY17.
· Growth in retail segment was led by housing segment (19.5%YoY, 2.4%QoQ), Service and Traders segment (39.1%YoY). Weakness in retail advances was led by contraction in gold loans (29.3%YoY), loan against deposits (1.7%YoY) and Manufacturing (1.9%YoY). Proportion of gold loans in retail segment increased 9bpsQoQ from 3.28% to 3.37% in the current quarter. With the gold prices inching up, the management expected the Gold loan to grow ~ 20% in FY17.
· Deposits grew (10.6%YoY, 3.9%QoQ) to INR 579bn supported by growth in Term deposits (9.3%YoY, 2.7%QoQ). CASA mobilisation improved at (15.4%YoY, 8.0%QoQ) amidst higher growth in SA (17.1%YoY) and CA (7.5%YoY). Consequently, the share of CASA deposits increased (96bps YoY) to 23.2% for the quarter. Core deposits increased by 13% YoY to INR 486.3bn, while non-core deposits increased consequently by 1%YoY to INR 92.5bn.
Valuation: The Stock currently trades at 0.7x PBV of FY18E. We maintain our rating of MARKETPRFORMER for the stock with a revised target price of INR 24 (Prev. Target Price: INR 20) implying a 0.85X P/B FY18E.
Risks: Tougher ramp up of retail loan book; fresh big ticket slippages from corporate book.
Regards,
CSEC Research
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