High exposure to infrastructure sector poses risks to SBI: Hemindra Hazari

In a chat with ET Now, market expert Hemindra Hazari shares his view on the forthcoming fourth quarter results of State Bank of India (SBI).

ET Now: With PNB being an exception, PSU banks have come up with healthy set of numbers. BoB did extremely well. The stock reacted quite well. OBC too performed well. I was wondering that if the lesser well-managed banks are doing, what could be expected from SBI. What kind of numbers can SBI come up with? The lender will disclose its fourth quarter earnings in the next couple of days.

Hemindra Hazari: SBI numbers will be keenly watched because it is the largest bank in the PSU banking space.

It is also a big infrastructure lender. If you look at SBI earnings in the last couple of quarters, while the other large PSU banks were going slow on their infrastructure lending, SBI continued to march ahead.

To me, that has always been an issue because SBI’s infrastructure, and especially power portfolio, does not have much State Electricity Board (SEB) exposure.

SEB, in the power sector, is a low-risk exposure for banks because the government always bails them out.

It is the private sector power companies which pose a grave risk.

We just have to see what kind of growth SBI does report in the infrastructure space as well as in the power sector space.

To me the fourth quarter profits or the NPA position is not that relevant.

The growth that you are reporting today could lead to problems in the future. HDFC Bank has thrown a joker in the pack, when they sold the Essar Steel exposure because banks such as SBI have a very huge exposure to Essar Steel and the Essar Group.

We know that it is valued now at 60 paise (against Re 1). All those sitting on those types of loans will have to really value at 40 per cent discount than what it is today.