State Bank of India to focus more on retail loans, primarily auto and housing loans

Due to subdued demand from large corporates in absence of investment activity and higher bad assets in mid corporates, State Bank of India has turned its focus on retail loans, primarily auto and housing loans to grow its asset book.

According to the management, home loan sanctions have increased to Rs 1.5 bn a day from Rs 650 mn in September. This has been due to lower lending rates compared to the competitors, reduced processing time and transfer of loans from other financial institutions at attractive rates. With a 13% growth year-on-year in the September quarter, they expect it to grow at 25-30% by the end of the current fiscal.

The 28% year-on-year growth in the first half of the current fiscal in auto loans was led by the new seven year loan scheme and lower interest rates. This has helped it to remain one of the largest players in the auto loan market.

With bad assets growing to 9.46% from the mid corporate group in the September quarter, SBI has decided to go slow on this segment. It has mostly catered to the working capital needs of the large corporates in the last 2-3 quarters due to muted credit demand in the absence of large projects.

At Rs 2,377 it is trading at a higher price-to-book multiple of 1.9 compared to its Public sector (PSU) peers. With growth prospects looking a little bleak given the market scenario, any upside to the stock in the near term looks limited.

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