Specialist in Indian Banking and Economic Research

Hemindra Hazari

Is a Securities & Exchange Board of India (SEBI) registered research analyst with over 25 years experience in the Indian capital markets with a specialization in banking and economy research and has managerial experience of establishing profitable equities business, leading and mentoring analysts.  He has worked with prominent foreign and domestic capital market firms such as UBS, Societe Generale, HSBC, ASK Raymond James  and Karvy Stock  Broking and is a regular guest on business media channels and is respected for his non-consensus view on stocks and the market.

SBI’s NPA Reduction Was Largely On Account of Write-Offs, Not Better Management

State Bank of India – Credit Continues To Fall Off A Cliff

State Bank of India – Reserve Shortfall Needs To Be Addressed

Yes Bank’s Hike in Deferred Tax Assets: Short-Sighted Policy

Punjab National Bank – This Ain’t Over By A Long Shot

Equity Bottom-Up

SBI (State Bank of India) / Equity Bottom-Up

At a time when many private sector banks such as <a href="https://www.smartkarma.com/entities/hdfc-bank-ltd-4b6b7a92-9087-468d-9dbe-ab169e77f014" target="_blank" data-smartkarma-citation="entities:558:1" rel="noopener">HDFC Bank (HDFCB IN)</a>, <a href="https://www.smartkarma.com/entities/icici-bank-ltd" target="_blank" data-smartkarma-citation="entities:547:1" rel="noopener">ICICI Bank Ltd (ICICIBC IN)</a>, <a href="https://www.smartkarma.com/entities/axis-bank-ltd" target="_blank" data-smartkarma-citation="entities:768:1" rel="noopener">Axis Bank Ltd (AXSB IN)</a>, <a href="https://www.smartkarma.com/entities/indusind-bank-ltd" target="_blank" data-smartkarma-citation="entities:1558:1" rel="noopener">Indusind Bank (IIB IN)</a> and <a href="https://www.smartkarma.com/entities/yes-bank-ltd" target="_blank" data-smartkarma-citation="entities:767:1" rel="noopener">Yes Bank (YES IN)</a> have increased their deferred tax assets (DTA) in 2HFY2020 as compared with 1HFY2020, thereby inflating their net profits in the period, it is heartening to observe that <a href="https://www.smartkarma.com/entities/state-bank-of-india" target="_blank" data-smartkarma-citation="entities:160:1" rel="noopener">State Bank Of India (SBIN IN)</a>, India’s largest and the government’s premier bank, has continued its policy (since FY2019) of reducing its DTA. By reversing its earlier policy (in FY2017 and FY2018) of increasing DTA, SBI has adopted a more conservative accounting policy and in doing so, stakeholders must note that its reported consolidated profits have been depressed in FY2020 by Rs 75 bn, or by 38%. SBI’s consolidated outstanding DTA in FY2020, at Rs 34.9 bn, is now significantly lower than that of ICICI Bank, Yes Bank, Axis Bank and even HDFC Bank.While SBI is one of the few banks which is reducing DTA, the Reserve Bank of India (RBI) continues to be ignorant of how other banks have been consistently increasing DTA (in 2QFY2020 those banks which opted for the lower corporate tax rate had to reduce DTA). They do this to inflate net profits so as to meet capital market expectations, and thereby to prop up their share prices. It would be prudent for SBI to continue this policy and reduce its DTA to nil in the immediate future.A tsunami of bad debts is likely to hit Indian banks and those who continue to maintain a high outstanding DTA are going to be more vulnerable.

At a time when many private sector banks such as HDFC Bank (HDFCB IN), ICICI Bank Ltd (ICICIBC IN), Axis Bank Ltd (AXSB IN), Indusind Bank (IIB IN) and Yes Bank (YES IN) have increased their deferred tax assets (DTA) in 2HFY2020 as compared with 1HFY2020, thereby inflating their net profits in the period, it is heartening to observe that State Bank Of India (SBIN IN), India’s largest and the government’s premier bank, has continued its policy (since FY2019) of reducing its DTA. By reversing its earlier policy (in FY2017 and FY2018) of increasing DTA, SBI has adopted a more conservative accounting policy and in doing so, stakeholders must note that its reported consolidated profits have been depressed in FY2020 by Rs 75 bn, or by 38%. SBI’s consolidated outstanding DTA in FY2020, at Rs 34.9 bn, is now significantly lower than that of ICICI Bank, Yes Bank, Axis Bank and even HDFC Bank.While SBI is one of the few banks which is reducing DTA, the Reserve Bank of India (RBI) continues to be ignorant of how other banks have been consistently increasing DTA (in 2QFY2020 those banks which opted for the lower corporate tax rate had to reduce DTA). They do this to inflate net profits so as to meet capital market expectations, and thereby to prop up their share prices. It would be prudent for SBI to continue this policy and reduce its DTA to nil in the immediate future.A tsunami of bad debts is likely to hit Indian banks and those who continue to maintain a high outstanding DTA are going to be more vulnerable.

SBIがDTAを削減、民間銀行がDTAを積み増す、アナリストはどちらも沈黙