Be very cautious on PSBs, including SBI: SMC Global Securities

When you look at the SBI numbers, they are not very disappointing, says Siddharth Purohit, analyst.

None of these numbers really matter. What matters is the management commentary. What in particular would you be watching out for from the SBI commentary today?
Yes, the Q4 numbers really do not matter much because we have not really seen the impact of Covid during that time. Some of that will be visible in Q1 and Q2. So any sort of guidance on the quantum of moratorium that people have opted for and how much of that slipped into NPA will be more helpful. Judging the numbers based on Q4 performance will not be correct.

When I see the absolute provisions, there is no doubt it has gone up quarter on quarter. But given the current environment, the provisions could even go up because from Rs 7,200 crore, it has gone up to Rs 13,500 crore and it looks like it is not sufficient in the current environment. So more clarity is needed in terms of moratorium. In the second phase how many people are going to opt for that will be equally important. So the environment remains really challenging for banking including SBI. As I said earlier, SBI has seen one of the large lenders across India and changes in the scenario cannot continue for a long period of time. So I will not go by the numbers in Q4. It is good enough but I will wait for more clarity for the coming quarters and then take a call accordingly. So we should wait for the management commentary before taking a further call on it.

Has there been a miss on the NII front?
One should not look at the fast numbers and I am very clear about it. As an investor, if I am going to look forward to this stock and what will be the call going ahead, Q4 numbers do not have much importance. In Q4, the only thing that matters is how much provisions we have done. So the quarter gone by has not much relevance when I am taking a decision to invest in the stock. So I will not go by whether they have slipped a bit in terms of NII or provisions. Clearly a lot of issues are there and the management probably will come out with clarity. If you look at the capital position, they have a PAT of 9.77% that has been reported. So I think we need to focus a lot more on those aspects rather than the quarter gone by because when the growth has not happened beyond 6-6.5%, you cannot expect NII to grow. So there will be misses on that front. I will not be surprised if the NII continues to disappoint even for many quarters. In fact what market will watch out for is whether the quantum of provisions that the bank will require is moderate or essentially higher than the current level. So those are the important things and we would be waiting for clarity on that front.

What is your call on the stock post the results or would you still await management commentary first?
Yes, when you look at the numbers, they are not very disappointing. But I think in the previous quarter also I had mentioned that for the banking industry, growth is the biggest challenge. It is not only about the asset quality. Right now both are challenges. My call is a bit cautious on the banking sector as a whole and public sector banks in particular because they will have to raise a little higher capital. So I will not take a positive call at this stage. But one thing that is probably supportive is the way the stock has corrected sharply.