Flashnote

abc
Global Research

Financial Institutions Group

Commercial Banks
Equity – India
State Bank of India (SBI)
Underweight UW: 2Q FY11 results a mixed bag
Target price 2800.00  2Q profits below our and street estimates; higher loan loss
Share price 3272.55 provisions and one-offs offset NIM gains
Potential return (%) -13.2
Performance 1M 3M 12M
 Excluding one-off additions from State Bank of Indore,
Absolute (%) 0.8 23.5 41.2
Relative^ (%) -2.1 8.3 11.7 slippages remained high, dragging profits down
Index^ BOMBAY SE SENSITIVE INDEX
RIC SBI.BO  Reiterate UW (remove V-flag), raise target price to INR2,800
Bloomberg SBI IN
(from INR2,169), implying a potential return of -13%
Market cap (USDm) 46,862
Market cap 2,078,063
Free float (%) 57
Note: (V) = volatile (please see disclosure appendix) 2QFY11 results: SBI posted flat profits y-o-y at INR25bn, 19% below and 15% below
street estimates. Although the bank delivered better-than-expected margins and higher fee
9 November 2010
income growth, the gains were offset by continuing asset quality deterioration, provisioning
Tejas Mehta* requirements on employee gratuities and efforts to meet RBI’s 70% coverage norms.
Analyst
HSBC Securities & Capital Markets
(India) Private Limited Key themes: SBI merged with State Bank of Indore in 2Q, almost entirely supporting its loan
+91 22 2268 1243 book growth of 4% q-o-q. A higher CASA mix, along with peak LDR of 80%, helped margins
tejasmehta@hsbc.co.in
expand 25bps q-o-q. Asset quality slippages worsened even after excluding the one-off from
Sachin Sheth* the merger, emanating mainly from agri, international, SME and restructured portfolios.
Analyst
HSBC Securities & Capital Markets Expectations and outlook: We believe SBI key earnings’ upsides have played out in 1H
(India) Private Limited
+91 22 2268 1224 with its margins likely to have peaked and further improvement in the cost/income ratio
sachinsheth@hsbc.co.in appearing difficult, in addition to delinquencies and provisioning pressure continuing to
Todd Dunivant* meet the RBI deadline for 70% provision cover by Sep-11. Beyond FY11, we expect fully
Head of Banks Research, Asia Pacific diluted earnings CAGR of 22%, driven mainly by asset quality risks abating. We fine-tune
The Hongkong and Shanghai Banking
Corporation Limited our estimates but SBI’s return ratios remain below peers, along with multiples at a
+852 2996 6599 premium to peers, which are likely to act as a drag on stock performance.
tdunivant@hsbc.com.hk

View HSBC Global Research at: Valuation and risks: Our revised 12-month target price is INR2,800 from INR2,169,
http://www.research.hsbc.com
which implies a 13% negative potential return to the current market price. Accordingly we
*Employed by a non-US affiliate of
maintain our Underweight rating, removing the volatility flag. We continue to value SBI
HSBC Securities (USA) Inc, and is not
registered/qualified pursuant to FINRA using a weighted average combination of PE, PB and economic profit model (EPM)
regulations
methodologies. For PE and PB we set our target multiples after examining historical
Issuer of report: HSBC Securities and
Capital Markets trading patterns and hence use 24-month forward EPS and BV in our valuation.
(India) Private Limited Accordingly, we value SBI at 11.7x PE and 1.8x PB based on 24-month forward EPS and
Disclaimer & BPS. Key upside risks to our rating and estimates: (1) Margins remaining high at
Disclosures current levels, (2) operating expenses declining further, and (3) delinquencies declining
This report must be read more than expectations.
with the disclosures and
the analyst certifications in
the Disclosure appendix,
and with the Disclaimer,
which forms part of it
 State Bank of India (SBI)
Commercial Banks abc
9 November 2010

Financials & valuation

Year to 3/2010a 3/2011e 3/2012e 3/2013e Year to 3/2010a 3/2011e 3/2012e 3/2013e
P&L summary (INR m) Growth (YoY %)
Net Interest Income 236,714 326,497 379,950 449,269 Net interest income 13.4 37.9 16.4 18.2
Non-interest Income 149,682 162,885 190,615 220,762 Non-interest income 17.9 8.8 17.0 15.8
Net fees/commission 96,409 117,887 139,923 162,107 Operating expense 29.8 13.4 16.9 17.5
Trading profits 26,903 14,203 15,870 17,370 PPOP 2.3 41.4 16.3 17.3
Other 26,370 30,794 34,822 41,285 Provisions 17.7 92.0 (17.7) (1.4)
Total Operating income 386,396 489,381 570,565 670,031 PBT (1.8) 25.4 32.8 22.9
Operating expense 203,187 230,321 269,196 316,426 PAT 0.5 24.7 33.1 23.1
Staff costs 127,546 145,741 170,139 200,252
Other oper expenese 75,640 84,580 99,058 116,174 Customer loans (net) 16.5 19.5 22.0 20.1
PPOP 183,209 259,060 301,368 353,605 Total Assets 9.2 17.7 18.0 18.7
Provisions 43,948 84,387 69,470 68,514 RWA 15.6 15.0 15.8 17.1
Bad debt 51,479 77,511 61,434 59,833 Customer deposits 8.4 21.0 20.2 21.4
Other (7,530) 6,876 8,036 8,681
Other non-oper profit(loss) Ratios (%)
HSBC PBT 139,261 174,673 231,898 285,092 NIM 2.47 3.00 2.97 2.96
Exceptionals - - - - Gross yield 7.41 7.74 7.87 8.00
Profit-before tax 139,261 174,673 231,898 285,092 Cost of funds 5.34 5.07 5.22 5.37
Taxation 47,600 60,416 79,769 97,890 Spread 2.07 2.67 2.65 2.64
PAT 91,661 114,258 152,129 187,201
Minorities + pref dividend - - - - NPL/gross loans 3.05 3.29 3.11 2.92
Attributable profit 91,661 114,258 152,129 187,201 Credit cost 0.9 1.1 0.7 0.6
HSBC attributable profit 91,661 114,258 152,129 187,201 Coverage 44.4 54.2 58.6 60.1
NPL/RWA 2.2 2.5 2.5 2.4
Balance sheet summary (INRm)
Provision/RWA 1.0 1.3 1.4 1.4
Total assets 10,534,137 12,401,115 14,633,790 17,363,064 Net write-off/RWA - - - -
Customer loans (net) 6,319,142 7,549,967 9,207,317 11,056,020 NPL/NTE 29.6 33.8 27.3 27.1
Investment assets 2,857,901 3,283,110 3,700,343 4,404,293 Net loans/total assets 60.0 60.9 62.9 63.7
Other_assets 1,357,095 1,568,038 1,726,129 1,902,752 RWA/total assets 84.7 82.7 81.2 80.2
Total Liabilities 9,874,645 11,652,621 13,567,367 16,150,156 Loans/deposits 78.6 77.6 78.8 77.9
Customer deposits 8,041,162 9,725,866 11,690,515 14,190,671 Avg IEA/avg total assets 95.0 94.9 94.7 94.9
Debt securities issued 738,372 787,780 834,962 885,613 Avg IBL/avg total liab 93.6 94.5 95.4 96.1
Other liabilities 1,095,111 1,138,975 1,041,890 1,073,872
Total capital 659,492 748,494 1,066,423 1,212,909 Cost/income 52.6 47.1 47.2 47.2
Ordinary equity 659,492 748,494 1,066,423 1,212,909 Non-int income/total income 38.7 33.3 33.4 32.9
Minorities + other capital ROAA (including goodwill) 0.91 1.00 1.13 1.17
IEA (avg) 9,585,283 10,881,451 12,800,452 15,190,272 ROAE (including goodwill) 14.8 16.2 16.8 16.4
IBL (avg) 8,866,436 10,174,753 12,027,675 14,279,163 Return on avg tier 1 11.9 13.0 14.0 14.5
Leverage (x) 16.3 16.3 14.9 14.0
Capital adequacy (%)
Valuation data
RWA (INRm) 8,922,031 10,260,336 11,886,268 13,919,128
Core tier 1 9.5% 9.2% 10.4% 9.7% PE (diluted EPS) 22.7 18.2 15.0 12.2
Total tier 1 9.5% 9.2% 10.4% 9.7% P/PPOP 11.3 8.0 7.6 6.4
Total capital 13.4% 13.1% 14.0% 13.0% P/BVPS 3.2 2.8 2.1 1.9
P/NTE 3.2 2.8 2.1 1.9
Per share data (INR) Dividend yield (x) 0.9 1.0 1.3 1.5
P/Deposit 0.26 0.21 0.19 0.16
EPS reported (fully diluted) 144.4 180.0 218.6 269.0 P/Asset 0.20 0.17 0.16 0.13
HSBC EPS (fully diluted) 144.4 180.0 218.6 269.0
DPS 30.0 34.0 42.0 50.0 Note: * = Based on HSBC EPS (fully diluted)
NAV 1,038.8 1,178.9 1,532.2 1,742.7
NAV (including goodwill) 1,038.8 1,178.9 1,532.2 1,742.7 Price relative
3570 3570
ROAA deconstruction
3070 3070
Net interest income 2.35 2.85 2.81 2.81
2570 2570
Total interest income 7.04 7.35 7.45 7.60
Total interest expense 4.69 4.50 4.64 4.79 2070 2070
Net fees & commission 0.96 1.03 1.04 1.01 1570 1570
Other income 0.53 0.39 0.38 0.37 1070 1070
Operating income 3.83 4.27 4.22 4.19
570 570
Operating expenses 2.01 2.01 1.99 1.98
2008 2009 2010 2011
Staff costs 1.26 1.27 1.26 1.25 State Ban k of India Rel to BOMBAY SE SENSITIV E INDEX
Other oper exp 0.75 0.74 0.73 0.73
PPOP 1.82 2.26 2.23 2.21 Source: HSBC
Provisions 0.44 0.74 0.51 0.43
Non-op items - - - -
PBT 1.38 1.52 1.72 1.78
Taxation 0.47 0.53 0.59 0.61
PAT 0.91 1.00 1.13 1.17

2
 State Bank of India (SBI)
Commercial Banks abc
9 November 2010

SBI: 2Q FY11 results summary

(INRbn) 2Q FY11 y-o-y % q-o-q %
Income statement
Interest income 198.08 11% 7%
Interest on Advances 145.81 15% 9%
Income on Investments 48.04 6% 7%
Interest on Balances with RBI & other inter bank funds 0.82 -80% -41%
Other interest 3.41 79% -19%
Interest expense 116.93 -4% 5%
Net interest income 81.15 45% 11%
Other income - ex Treasury 38.08 28% 8%
Treasury gain 1.97 -64% 14%
Total other income 40.05 14% 9%
Operating income 121.20 33% 10%
Core operating income 119.23 39% 10%
Operating expense 57.63 34% 19%
Of which employee expenses 36.76 40% 20%
Operating profit 63.57 31% 4%
Core operating profit 61.60 44% 3%
Loan loss provisions 21.62 96% 25%
Other provisions 4.59 632% 352%
Total provisions 26.21 158% 69%
Pre tax profit 37.36 -2% -18%
Tax 12.34 -7% -26%
Net profit 25.01 0% -14%

Balance sheet 2Q FY11 y-o-y % q-o-q %

Advances 6,807 19% 4%
Deposits 8,553 11% 5%
CASA mix 47.8% 683bps 28bps
Gross NPLs 232.0 34% 11%
Net NPLs 116.0 17% 5%
Total Assets 11,045 12% 3%
Average Total Assets 10,863 11% 2%

Ratios 2Q FY11 y-o-y %pts q-o-q %pts

LDR 79.6 5.6 (0.5)
Incremental LDR 131.7 80.8 (82.5)
Margins (reported) 3.4 0.9 0.3
Cost-income ratio 47.5 0.5 3.3
Core cost income ratio 48.3 (1.7) 3.4
LLP/Avg loans 1.3 0.5 0.2
Gross NPL ratio 3.4 0.4 0.2
Net NPL ratio 1.7 (0.0) -
Coverage ratio 50.0 7.1 3.2
Tier 1 ratio 9.6 (0.2) (0.2)
Total CAR 13.2 (0.9) (0.3)
Effective tax rate 33.0 (1.8) (3.4)
ROA 0.9 (0.1) (0.2)
Source: Company data, HSBC

3
 State Bank of India (SBI)
Commercial Banks abc
9 November 2010

SBI: Earnings outlook

(INRm) FY11e y-o-y % FY12e y-o-y % FY13e y-o-y %
Income Statement
Interest Income 842,559 18.7% 1,007,315 19.6% 1,215,397 20.7%
Interest Expenses 516,062 9.1% 627,365 21.6% 766,129 22.1%
Net Interest Income (NII) 326,497 37.9% 379,950 16.4% 449,269 18.2%
P/(L) on sale of Investments 7,676 -63.7% 8,729 13.7% 9,726 11.4%
P/(L) on Exchange Transactions 18,696 17.8% 20,485 9.6% 24,173 18.0%
Fee & Other Income 136,512 21.2% 161,400 18.2% 186,864 15.8%
Non-interest income ex-treasury 155,208 20.8% 181,885 17.2% 211,037 16.0%
Total Non-Interest Income 162,885 8.8% 190,615 17.0% 220,762 15.8%
Total Income 489,381 26.7% 570,565 16.6% 670,031 17.4%
Operating Expenses 230,321 13.4% 269,196 16.9% 316,426 17.5%
Pre-provisioning Profits 259,060 41.4% 301,368 16.3% 353,605 17.3%
Provisions for NPAs 77,511 50.6% 61,434 -20.7% 59,833 -2.6%
Provisions for Std. Assets 2,654 231.5% 3,993 50.5% 3,877 -2.9%
Provisions on Investments 2,835 -128.7% 2,367 -16.5% 2,778 17.3%
Other Provisions 1,387 -10.5% 1,676 20.8% 2,026 20.9%
Total Provisions 84,387 92.0% 69,470 -17.7% 68,514 -1.4%
PBT 174,673 25.4% 231,898 32.8% 285,092 22.9%
Tax 60,416 26.9% 79,769 32.0% 97,890 22.7%
PAT 114,258 24.7% 152,129 33.1% 187,201 23.1%
Balance Sheet FY11e y-o-y % FY12e y-o-y % FY13e y-o-y %
Deposits 9,725,866 21.0% 11,690,515 20.2% 14,190,671 21.4%
Net Advances 7,549,967 19.5% 9,207,317 22.0% 11,056,020 20.1%
Total Assets 12,401,115 17.7% 14,633,790 18.0% 17,363,064 18.7%
Book Value (INR) 1,178.95 13.5% 1,532.24 30.0% 1,742.71 13.7%
EPS (INR) 179.97 24.7% 218.58 21.5% 268.97 23.1%
Ratios FY11e y-o-y %pnts FY12e y-o-y %pnts FY13e y-o-y %pnts
Net Interest Margin 3.00% 0.53 2.97% (0.03) 2.96% (0.01)
ROA 1.00% 0.09 1.13% 0.13 1.17% 0.04
ROE 16.2% 1.43 16.8% 0.53 16.4% (0.34)
Tax rate 34.6% 0.41 34.4% (0.19) 34.3% (0.06)
Cost Income 47.1% (5.52) 47.2% 0.12 47.2% 0.04
Core Cost Income 47.8% (7.82) 47.9% 0.10 47.9% 0.01
Source: Company data, HSBC estimates

SBI: Estimates changes

(INR m) FY11e (New) Change FY12e (New) Change
Income Statement
Interest Income 842,559 -1.8% 1,007,315 -3.8%
Interest Expenses 516,062 -8.5% 627,365 -10.2%
Net Interest Income (NII) 326,497 11.3% 379,950 9.3%
Non-interest income ex-treasury 155,208 -4.8% 181,885 -10.2%
Total Non-Interest Income 162,885 -10.3% 190,615 -14.9%
Total Income 489,381 3.0% 570,565 -0.2%
Operating Expenses 230,321 -2.6% 269,196 -2.6%
Pre-provisioning Profits 259,060 8.6% 301,368 2.1%
Total Provisions 84,387 18.4% 69,470 -9.1%
PBT 174,673 4.5% 231,898 6.0%
Tax 60,416 4.1% 79,769 5.6%
PAT 114,258 4.6% 152,129 6.2%
Balance Sheet
Deposits 9,725,866 -2.7% 11,690,515 -4.6%
Net Advances 7,549,967 -1.8% 9,207,317 0.0%
Total Assets 12,401,115 -1.9% 14,633,790 -2.7%
Book Value (INR) 1,179 0.3% 1,532 12.7%
EPS (INR) 180 4.7% 219 -3.1%
Ratios %pnts %pnts
Net Interest Margin 3.0% 0.34 3.0% 0.32
ROA 1.0% 0.05 1.1% 0.09
ROE 16.2% 0.70 16.8% -1.04
Cost Income 47.1% -2.72 47.2% -1.16
Core Cost Income 47.8% -3.99 47.9% -2.30
Source: Company data, HSBC estimates

4
 State Bank of India (SBI)
Commercial Banks abc
9 November 2010

SBI: CASA and margins SBI: Cost ratios

50% 4.0% 70%

45% 65%
3.5%
40% 60%
3.0% 55%
35%
2.5% 50%
30%
45%
25% 2.0%
40%
1Q08

3Q08

1Q09

3Q09

1Q10

3Q10

1Q11
2Q08

4Q08

2Q09

4Q09

2Q10

4Q10

2Q11

1Q06

4Q06

2Q07
3Q07
1Q08
2Q08
4Q08
1Q09

3Q09

1Q10
2Q10

4Q10
1Q11
2Q06
3Q06

1Q07

4Q07

3Q08

2Q09
4Q09

3Q10

2Q11
Low cost deposit m ix NIM (RHS)
Cost Income R atio Core C ost Inc ome R atio

Source: Company data, HSBC Source: Company data, HSBC

SBI: Rising slippages and NPAs SBI: Coverage ratio (RBI guidelines) and credit cost

4.0% 3.4% 64% 1.5%

3.3% 62%
3.0%
60% 1.0%
3.2%
2.0% 58%
3.1%
56% 0.5%
1.0% 3.0% 54%
0.0% 2.9% 52% 0.0%
2Q11
3Q10

4Q10

1Q11

4Q09

1Q10

2Q10

3Q10

4Q10

1Q11

2Q11

Slippages% GNPA% Cov erage % Credit cost %

Source: Company data, HSBC Source: Company data, HSBC

SBI: PE 12m forward SBI: PB 12m forward

18x 2.6x
15x 2.3x
12x 2.0x
9x 1.7x
6x 1.4x
1.1x
3x
0.8x
0x
0.5x
May-92

May-95

May-98

May-01

May-04

May-07

May-10

May-92

May-95

May-04

May-07

May-10
May-98

May-01

Rolling P/E Av g 5y r Av g 10y r Rolling P/B Av g 5y r Av g 10y r

Source: Bloomberg, Company data, HSBC Source: Bloomberg, Company data, HSBC

5
 State Bank of India (SBI)
Commercial Banks abc
9 November 2010

Valuation and risks

Underweight, target price INR2,800
We continue to value SBI using a weighted average combination of PE, PB, and economic profit model
(EPM) methodologies. We assign 75%, 15% and 10% weights each to the PE, PB and EPM components,
respectively. For PE and PB we set our target multiples after examining historical trading patterns and
hence use 24-month forward EPS and BV. Accordingly, we value SBI at 11.7x PE and at 1.8x PB. The
three-stage EPM uses explicit forecasts until FY13e, followed by 10 years of semi-explicit forecasts. The
final stage of 12 years (fade period) assumes convergence of ROE and COE. EPM is based on the
assumptions in the following table.

SBI: EPM assumptions (INR)

Semi-explicit forecasts for 10 years
Loan CAGR 8%
Dividend payout 20%
Fade period of 12 years
Risk-free rate 8%
Beta 1.0
Equity risk premium 6%
Cost of equity 14%
EPM value of Bank 1,274
EPM value of Subsidiaries 543
Total EPM value (including subsidiaries) 1,816
Source: HSBC estimates

SBI: Sum-of-parts valuation (INRm)

Stake Value to SBI Value/share Remarks
SBI associate banks 206,228 325 1.1x FY12e PB
SBI Life 74% 147,867 233 16% NBAP margins and 16x new business multiple
SBI AMC 63% 10,609 17 4% of AUM
SBI Capital markets 86% 24,213 38 15x FY12e earnings
SBI DFHI 67% 12,522 20 15x FY12e earnings
Total value of Subsidiaries 632
Less: Cost of investment 90
EPM value of Subsidiaries 543
Source: Company data, HSBC estimates

We are raising our 12-month target price to INR2,800 from INR2,169, following our estimate changes.
Under our research model, for stocks without a volatility indicator, the Neutral band is 5ppt above and
below our hurdle rate for Indian stocks of 10.5%, or 5.5-15.5% around the current share price. Our new
target price of INR2,800 suggests a negative potential return, including dividend yield, of 13%, which is
below the Neutral band. We therefore reiterate our Underweight rating on the stock. We have removed
the volatility flag as, under HSBC’s ratings system, the stock is no longer considered volatile (26%, see
Disclosures, page 7, for fuller explanation).

SBI: Valuations and risks summary (INR)

PE Weight 75% PB Weight 15% Weight 10% Weighted Upside
multiple PE-based TP multiple PB-based TP DCF value target price risks
New 11.7 2,901 1.8 2,979 1,816 2,800 Higher margins, lower credit and opex costs
Old 12.4 2,243 1.8 2,171 1,606 2,169
Source: HSBC estimates

6
 State Bank of India (SBI)
Commercial Banks abc
9 November 2010

Disclosure appendix
Analyst Certification
The following analyst(s), economist(s), and/or strategist(s) who is(are) primarily responsible for this report, certifies(y) that the
opinion(s) on the subject security(ies) or issuer(s) and/or any other views or forecasts expressed herein accurately reflect their
personal view(s) and that no part of their compensation was, is or will be directly or indirectly related to the specific
recommendation(s) or views contained in this research report: Tejas Mehta, Sachin Sheth and Todd Dunivant

Important disclosures
Stock ratings and basis for financial analysis
HSBC believes that investors utilise various disciplines and investment horizons when making investment decisions, which
depend largely on individual circumstances such as the investor's existing holdings, risk tolerance and other considerations.
Given these differences, HSBC has two principal aims in its equity research: 1) to identify long-term investment opportunities
based on particular themes or ideas that may affect the future earnings or cash flows of companies on a 12 month time horizon;
and 2) from time to time to identify short-term investment opportunities that are derived from fundamental, quantitative,
technical or event-driven techniques on a 0-3 month time horizon and which may differ from our long-term investment rating.
HSBC has assigned ratings for its long-term investment opportunities as described below.

This report addresses only the long-term investment opportunities of the companies referred to in the report. As and when
HSBC publishes a short-term trading idea the stocks to which these relate are identified on the website at
www.hsbcnet.com/research. Details of these short-term investment opportunities can be found under the Reports section of this
website.

HSBC believes an investor's decision to buy or sell a stock should depend on individual circumstances such as the investor's
existing holdings and other considerations. Different securities firms use a variety of ratings terms as well as different rating
systems to describe their recommendations. Investors should carefully read the definitions of the ratings used in each research
report. In addition, because research reports contain more complete information concerning the analysts' views, investors
should carefully read the entire research report and should not infer its contents from the rating. In any case, ratings should not
be used or relied on in isolation as investment advice.

Rating definitions for long-term investment opportunities

Stock ratings
HSBC assigns ratings to its stocks in this sector on the following basis:

For each stock we set a required rate of return calculated from the risk free rate for that stock's domestic, or as appropriate,
regional market and the relevant equity risk premium established by our strategy team. The price target for a stock represents
the value the analyst expects the stock to reach over our performance horizon. The performance horizon is 12 months. For a
stock to be classified as Overweight, the implied return must exceed the required return by at least 5 percentage points over the
next 12 months (or 10 percentage points for a stock classified as Volatile*). For a stock to be classified as Underweight, the
stock must be expected to underperform its required return by at least 5 percentage points over the next 12 months (or 10
percentage points for a stock classified as Volatile*). Stocks between these bands are classified as Neutral.

Our ratings are re-calibrated against these bands at the time of any 'material change' (initiation of coverage, change of volatility
status or change in price target). Notwithstanding this, and although ratings are subject to ongoing management review,
expected returns will be permitted to move outside the bands as a result of normal share price fluctuations without necessarily
triggering a rating change.

*A stock will be classified as volatile if its historical volatility has exceeded 40%, if the stock has been listed for less than 12
months (unless it is in an industry or sector where volatility is low) or if the analyst expects significant volatility. However,

7
 State Bank of India (SBI)
Commercial Banks abc
9 November 2010

stocks which we do not consider volatile may in fact also behave in such a way. Historical volatility is defined as the past
month's average of the daily 365-day moving average volatilities. In order to avoid misleadingly frequent changes in rating,
however, volatility has to move 2.5 percentage points past the 40% benchmark in either direction for a stock's status to change.

Rating distribution for long-term investment opportunities

As of 09 November 2010, the distribution of all ratings published is as follows:
Overweight (Buy) 48% (22% of these provided with Investment Banking Services)
Neutral (Hold) 37% (18% of these provided with Investment Banking Services)
Underweight (Sell) 15% (19% of these provided with Investment Banking Services)

Share price and rating changes for long-term investment opportunities

State Bank of India (SBI.NS) Share Price performance INR Vs HSBC rating Recommendation & price target history
history From To Date
Underweight Neutral (V) 06 May 2008
Neutral (V) Overweight (V) 27 January 2009
3385 Overweight (V) Neutral (V) 12 July 2009
Neutral (V) Underweight (V) 09 September 2009
2885 Underweight (V) Neutral (V) 19 February 2010
2385 Neutral (V) Underweight (V) 10 June 2010
1885 Target Price Value Date
1385 Price 1 2090.00 13 February 2008
885 Price 2 1980.00 06 May 2008
385 Price 3 1340.00 29 October 2008
Price 4 1540.00 14 May 2009
Nov-05

May-06

Nov-06

May-07

Nov-07

May-08

Nov-08

May-09

Nov-09

May-10

Nov-10

Price 5 1780.00 12 July 2009

Price 6 1751.00 09 September 2009
Price 7 1923.00 02 November 2009
Price 8 2038.00 27 November 2009
Price 9 2033.00 19 February 2010
Source: HSBC Price 10 2169.00 10 June 2010
Source: HSBC

8
 State Bank of India (SBI)
Commercial Banks abc
9 November 2010

HSBC & Analyst disclosures

Disclosure checklist
Company Ticker Recent price Price Date Disclosure
STATE BANK OF INDIA SBI.NS 3425.15 09-Nov-2010 1, 2, 4, 5, 6, 7, 11
Source: HSBC

1 HSBC* has managed or co-managed a public offering of securities for this company within the past 12 months.
2 HSBC expects to receive or intends to seek compensation for investment banking services from this company in the next
3 months.
3 At the time of publication of this report, HSBC Securities (USA) Inc. is a Market Maker in securities issued by this
company.
4 As of 30 September 2010 HSBC beneficially owned 1% or more of a class of common equity securities of this company.
5 As of 30 September 2010, this company was a client of HSBC or had during the preceding 12 month period been a client
of and/or paid compensation to HSBC in respect of investment banking services.
6 As of 30 September 2010, this company was a client of HSBC or had during the preceding 12 month period been a client
of and/or paid compensation to HSBC in respect of non-investment banking-securities related services.
7 As of 30 September 2010, this company was a client of HSBC or had during the preceding 12 month period been a client
of and/or paid compensation to HSBC in respect of non-securities services.
8 A covering analyst/s has received compensation from this company in the past 12 months.
9 A covering analyst/s or a member of his/her household has a financial interest in the securities of this company, as
detailed below.
10 A covering analyst/s or a member of his/her household is an officer, director or supervisory board member of this
company, as detailed below.
11 At the time of publication of this report, HSBC is a non-US Market Maker in securities issued by this company and/or in
securities in respect of this company

Analysts, economists, and strategists are paid in part by reference to the profitability of HSBC which includes investment
banking revenues.

For disclosures in respect of any company mentioned in this report, please see the most recently published report on that
company available at www.hsbcnet.com/research.

* HSBC Legal Entities are listed in the Disclaimer below.

Additional disclosures
1 This report is dated as at 09 November 2010.
2 All market data included in this report are dated as at close 09 November 2010, unless otherwise indicated in the report.
3 HSBC has procedures in place to identify and manage any potential conflicts of interest that arise in connection with its
Research business. HSBC's analysts and its other staff who are involved in the preparation and dissemination of Research
operate and have a management reporting line independent of HSBC's Investment Banking business. Information Barrier
procedures are in place between the Investment Banking and Research businesses to ensure that any confidential and/or
price sensitive information is handled in an appropriate manner.
4 As of 30 September 2010, HSBC beneficially owned 2% or more of a class of common equity securities of the following
company(ies): STATE BANK OF INDIA
5 As of 30 September 2010, HSBC and/or its affiliates (including the funds, portfolios and investment clubs in securities
managed by such entities) either, directly or indirectly, own or are involved in the acquisition, sale or intermediation of,
1% or more of the total capital of the subject companies securities in the market for the following Company(ies): STATE
BANK OF INDIA

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 State Bank of India (SBI)
Commercial Banks abc
9 November 2010

Disclaimer
* Legal entities as at 31 January 2010 Issuer of report
'UAE' HSBC Bank Middle East Limited, Dubai; 'HK' The Hongkong and Shanghai Banking Corporation
HSBC Securities and Capital Markets
Limited, Hong Kong; 'TW' HSBC Securities (Taiwan) Corporation Limited; 'CA' HSBC Securities (Canada)
(India) Private Limited
Inc, Toronto; HSBC Bank, Paris branch; HSBC France; 'DE' HSBC Trinkaus & Burkhardt AG, Dusseldorf;
000 HSBC Bank (RR), Moscow; 'IN' HSBC Securities and Capital Markets (India) Private Limited, Mumbai; Registered Office
'JP' HSBC Securities (Japan) Limited, Tokyo; 'EG' HSBC Securities Egypt S.A.E., Cairo; 'CN' HSBC 52/60 Mahatma Gandhi Road
Investment Bank Asia Limited, Beijing Representative Office; The Hongkong and Shanghai Banking Fort, Mumbai 400 001, India
Corporation Limited, Singapore branch; The Hongkong and Shanghai Banking Corporation Limited, Seoul Telephone: +91 22 2267 4921
Securities Branch; The Hongkong and Shanghai Banking Corporation Limited, Seoul Branch; HSBC
Fax: +91 22 2263 1983
Securities (South Africa) (Pty) Ltd, Johannesburg; 'GR' HSBC Pantelakis Securities S.A., Athens; HSBC
Bank plc, London, Madrid, Milan, Stockholm, Tel Aviv, 'US' HSBC Securities (USA) Inc, New York; HSBC Website: www.research.hsbc.com
Yatirim Menkul Degerler A.S., Istanbul; HSBC México, S.A., Institución de Banca Múltiple, Grupo
Financiero HSBC, HSBC Bank Brasil S.A. - Banco Múltiplo, HSBC Bank Australia Limited, HSBC Bank
Argentina S.A., HSBC Saudi Arabia Limited.
This document has been issued by HSBC Securities and Capital Markets (India) Private Limited ("HSBC") for the information of its customers only. HSBC
Securities and Capital Markets (India) Private Limited is regulated by the Securities and Exchange Board of India. If it is received by a customer of an affiliate
of HSBC, its provision to the recipient is subject to the terms of business in place between the recipient and such affiliate. This document is not and should not
be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. HSBC has based this document on information
obtained from sources it believes to be reliable but which it has not independently verified; HSBC makes no guarantee, representation or warranty and accepts
no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of the Research Division of HSBC only and are subject to
change without notice. HSBC and its affiliates and/or their officers, directors and employees may have positions in any securities mentioned in this document
(or in any related investment) and may from time to time add to or dispose of any such securities (or investment). HSBC and its affiliates may act as market
maker or have assumed an underwriting commitment in the securities of companies discussed in this document (or in related investments), may sell them to or
buy them from customers on a principal basis and may also perform or seek to perform investment banking or underwriting services for or relating to those
companies and may also be represented in the supervisory board or any other committee of those companies. The information and opinions contained within the
research reports are based upon publicly available information and rates of taxation applicable at the time of publication which are subject to change from time
to time. Past performance is not necessarily a guide to future performance. The value of any investment or income may go down as well as up and you may not
get back the full amount invested. Where an investment is denominated in a currency other than the local currency of the recipient of the research report,
changes in the exchange rates may have an adverse effect on the value, price or income of that investment. In case of investments for which there is no
recognised market it may be difficult for investors to sell their investments or to obtain reliable information about its value or the extent of the risk to which it is
exposed.
HSBC Securities (USA) Inc. accepts responsibility for the content of this research report prepared by its non-US foreign affiliate. All U.S. persons receiving
and/or accessing this report and wishing to effect transactions in any security discussed herein should do so with HSBC Securities (USA) Inc. in the United
States and not with its non-US foreign affiliate, the issuer of this report.
In the UK this report may only be distributed to persons of a kind described in Article 19(5) of the Financial Services and Markets Act 2000 (Financial
Promotion) Order 2001. The protections afforded by the UK regulatory regime are available only to those dealing with a representative of HSBC Bank plc in
the UK. In Singapore, this publication is distributed by The Hongkong and Shanghai Banking Corporation Limited, Singapore Branch for the general
information of institutional investors or other persons specified in Sections 274 and 304 of the Securities and Futures Act (Chapter 289) (“SFA”) and accredited
investors and other persons in accordance with the conditions specified in Sections 275 and 305 of the SFA. This publication is not a prospectus as defined in
the SFA. It may not be further distributed in whole or in part for any purpose. The Hongkong and Shanghai Banking Corporation Limited Singapore Branch is
regulated by the Monetary Authority of Singapore. Recipients in Singapore should contact a "Hongkong and Shanghai Banking Corporation Limited, Singapore
Branch" representative in respect of any matters arising from, or in connection with this report. In Australia, this publication has been distributed by The
Hongkong and Shanghai Banking Corporation Limited (ABN 65 117 925 970, AFSL 301737) for the general information of its “wholesale” customers (as
defined in the Corporations Act 2001). Where distributed to retail customers, this research is distributed by HSBC Bank Australia Limited (AFSL No. 232595).
These respective entities make no representations that the products or services mentioned in this document are available to persons in Australia or are
necessarily suitable for any particular person or appropriate in accordance with local law. No consideration has been given to the particular investment
objectives, financial situation or particular needs of any recipient.
In Japan, this publication has been distributed by HSBC Securities (Japan) Limited. In Hong Kong, this document has been distributed by The Hongkong and
Shanghai Banking Corporation Limited in the conduct of its Hong Kong regulated business for the information of its institutional and professional customers; it
is not intended for and should not be distributed to retail customers in Hong Kong. The Hongkong and Shanghai Banking Corporation Limited makes no
representations that the products or services mentioned in this document are available to persons in Hong Kong or are necessarily suitable for any particular
person or appropriate in accordance with local law. All inquiries by such recipients must be directed to The Hongkong and Shanghai Banking Corporation
Limited. In Korea, this publication is distributed by The Hongkong and Shanghai Banking Corporation Limited, Seoul Securities Branch ("HBAP SLS") for the
general information of professional investors specified in Article 9 of the Financial Investment Services and Capital Markets Act (“FSCMA”). This publication
is not a prospectus as defined in the FSCMA. It may not be further distributed in whole or in part for any purpose. HBAP SLS is regulated by the Financial
Services Commission and the Financial Supervisory Service of Korea.
© Copyright. HSBC Securities and Capital Markets (India) Private Limited 2010, ALL RIGHTS RESERVED. No part of this publication may be reproduced,
stored in a retrieval system, or transmitted, on any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior
written permission of HSBC Securities and Capital Markets (India) Private Limited. MICA (P) 142/06/2010 and MICA (P) 193/04/2010

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