State Bank of India -Multibagger Stock Analysis 2022
In this article, we can analyze the State Bank of India as a Potential Multibagger Stock as on 2022 November.
State Bank of India Ltd
State Bank of India is a Fortune 500 company. It is an Indian Multinational, Public Sector banking and financial services statutory body headquartered in Mumbai. It is the largest and oldest bank in India with over 200 years of history. Shri Dinesh Kumar Khara is the current Chairman. Shri C.S. Setty, Shri Swaminathan J, Shri Ashwini Kumar Tewari, and Shri Alok Kumar Choudhary are the Managing directors.
The bank has a market share of 22.84% in deposits and a 19.69% share in advances in India. It has a strong customer base of ~45 crore customers.
SBI Capital Markets Ltd (100% stake)
SBICAP is a leading investment banker, offering investment banking and corporate advisory services to clients across three product categories i.e. project advisory and structured finance, equity capital markets and debt capital markets.
This company further has wholly owned subsidiaries in related businesses viz. SBICAP Securities, SBICAP Trustee Co., SBICAP Ventures & others.
SBI DHFI Ltd (72% stake)
It is a primary dealer and supports the book building process and provides depth and liquidity to secondary markets in G-Sec. It also deals in money market instruments, non G-Sec debt instruments, amongst others.
SBI Cards and Payment Services Ltd (69% stake)
It is a non-banking financial company that offers extensive credit card portfolio to individual cardholders and corporate clients. It has diversified customer acquisition network that enables to engage prospective customers across multiple channels.[16]
The IPO of SBI Cards was launched in March 2020 wherein the company sold ~13 crore equity shares for a consideration of ₹10,350 crores.
Website
Location
the bank operates a network of 22,219 branches and ~62617 ATMs across India. It also operates ~71,968 business correspondent outlets across India.
The bank has a global footprint with a network of 233 branches/offices in 32 countries.It has presence in USA, Canada, Brazil, Russia, Germany, France, Turkey, Australia, Bangladesh, Nepal, Sri Lanka and other countries.
Leaders
Shri Dinesh Kumar Khara is the current Chairman. He has held several key positions such as MD (Global Banking & Subsidiaries), MD (Associates & Subsidiaries), MD & CEO (SBI Mutual Funds), and Chief General Manager – Bhopal Circle. He executed the merger of five Subsidiary Banks of SBI and Bhartiya Mahila Bank with SBI. Additionally, he headed the Risk, IT, and Compliance functions of the bank at various points.
Shri C.S. Setty, Shri Swaminathan J, Shri Ashwini Kumar Tewari, and Shri Alok Kumar Choudhary are the Managing directors.
Shri C.S. Setty designated as the Deputy Managing Director (DMD) at the bank responsible for resolving the stressed assets portfolio across the country in different sectors such as Oil, Power, Infra, Auto, and Telecom. he has held various positions at SBI such as VP & Head (syndications) in SBI, New York Branch, DGM in Commercial Branch, Indore, GM & RH, Corporate Account Group (CAG), Mumbai Branch, CGM, CAG and last assignment as DMD (SARG).Shri Swaminathan Served as a Nominee Director of SBI on the Boards of Yes Bank, Jio Payments Bank, SBI Payment Services and NPCI as well as Bank of Bhutan, an SBI JV.Shri Ashwini Kumar Tewa assumes charge as MD & CEO of SBI Card. Shri Alok Kumar Choudhary was on the Board of SBI Foundation and SBI Infra Management Solutions Private Ltd. As Deputy Managing Director & Corporate Development Officer of the Bank, he was also the Chief Sustainability Officer of SBI.
CA Shri Prafulla P Chhajed is the director. Mr. Chhajed is also a board member of the Confederation of Asia and Pacific Accountants and was previously an observer at IFAC Board. He also represented ICAI at various national and international organizations, such as board member of the South Asia Federation of Accountants and council of International Integrated Reporting Council. He is currently a member of the board for various organizations in India.
Highlights
The bank has a market share of 22.84% in deposits and 19.69% share in advances in India. It has a strong customer base of ~45 crore customers.The bank has a well-diversified loan book exposed to various sectors. Top sectors include home loans (23%), infrastructure (15%), services (12%) and agriculture (10%).
~75% of the corporate advances are rated A and better ratings from rating agencies. 38% of the corporate book accounts for PSUs & Govt. departments.SBI has always been the banker of choice to the government of India and is the market leader in government business. It had turnover of ~52,50,000 lakh crores and commissions of ~3,700 crores from government business in FY20.
Subsidiaries
- SBI LIFE INSURANCE COMPANY LIMITED (SBI-LIFE)
- SBI GENERAL INSURANCE COMPANY LIMITED (SBI GENERAL)
- SBI CARDS AND PAYMENT SERVICES LIMITED (SBICPSL)
- SBI FUNDS MANAGEMENT LIMITED(SBIFML)
- SBI CAPITAL MARKETS LIMITED ( SBICAPS)
- SBICAP Securities Ltd (SSL)
- SBICAP Ventures Limited (SVL). SBICAP TRUSTEE COMPANY LIMITED (STCL)
- SBI SG GLOBAL SECURITIES SERVICES PRIVATE LIMITED (SBI-SG)
- SBI DFHI LIMITED (SBI DFHI)
- SBI Payment Services Pvt Ltd. (SBI Payments)
- SBI GLOBAL FACTORS LIMITED (SBIGFL)
- SBIPENSION FUNDS PRIVATE LIMITED
Awards
- Best Strategies for Insurance Spreading
- 4th CRO Leadership Summit and Awards 2022
- Golden Peacock Award 2021 for Risk Management
- Silver for Financial Immunity Survey 2.0
- ‘Silver’ Honour’ at DIGIXX Awards 2022.
Products & Services
- Working Capital Finance
- Project Finance
- Deferred Payment Guarantees
- Corporate Term Loans
- Structured Finance
- Dealer Financing
- Channel Financing
- Equipment Leasing
- Loan Syndication
- Financing Indian Firms Overseas Subsidiaries or JVs
- Construction Equipment Loan
Profit & Loss
Expansions
- Bank launched ‘Samarthya’, an engagement program for all employees in the age group of 35 or below. The programme has been offered through a unique – “Smart Classroom”. Both Officers and Clerical staff attend the programme promoting cross-pollination of perspectives and ideas. Over 67000 employees are to be trained under the programme, and 72% have already been covered in FY2022.
- Two new End-to-End Digital Loan Journeys were introduced, viz., Pre-approved Two-Wheeler Loan (SBI Easyride) and Pre-approved Business Loan (PABL) for PoS customers of our subsidiary SBI PSPL (SBI Payment Services Pvt Ltd.). Loans aggregating `21,898 crore have been extended digitally through Analytics-based products in FY2022.
- To enhance the level of knowledge of the frontline staff and enhance customer experience, your Bank has introduced a mass knowledge enhancement programme, “Project Utkarsh”, It has also introduced the “Customer Service Index” for categorizing branches based on the quality of customer service.
- For opening new accounts in most customer categories (Individual & Non-individual) quickly and efficiently, image-based processing has been introduced in the year 2021-22. For the convenience of customers account opening facility through Video KYC was launched on 22.04.2021. About 6.40 lakh accounts have been opened through this facility till March 2022.
- A facility for SMS alerts in 13 languages has been enabled facilitating customers to register for SMS alerts in their preferred language. Multiple initiatives like multi-streaming of SMS outflow from CBS to Delivery Platform, infra upgradation for handling a higher volume of SMS and modifying SMS generation and transmission processes in CBS to handle higher volumes have been taken to reduce delays in SMS delivery.
- Functionality of Video Life Certificate was launched in November 2021, to facilitate submission of Life Certificate by pensioners through Video Calling.
- A new application for loan collection was launched in April 2021, for recording the follow-up calls to delinquent account holders. During the current year, 2.55 crore calls were made using this application.
- A mentoring program for new female employees was launched during the year to ensure their smooth transition in the organisation.
Positives
- Company has delivered good profit growth of 160% CAGR over last 5 years
- Intrinsic Value Discount above 80%
- Bank is into expansion through innovative products
- Return on Equity has increased versus last 3 years average to 13.70%
- Net NPA to Net Advances has declined versus last 3 years average
- Recent quater shows Net Profit increase of 50%
Negatives
- Very huge Corporate debts – A seroius economic crash could shake this bank & entire banking industry
- Economic Moat is due to low account charges & government tie-ups.
- Company has low interest coverage ratio.
- The company has delivered a poor sales growth of 4.70% over past five years.
- Other Income included in earnings
Warren Buffett Checklist
Factor | Value |
| Economic Moat | Good |
| Growth | Moderate |
| Valuation | High |
| Debt | High |
| Integrity | Moderate |
Summary
As per the Expansion & Value Investing grounds the company is having Low Multibagger Properties – one can expect 1-2X price growth in next 5 years.
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