Buy State Bank of India; target of Rs 659: YES Securities

YES Securities' research report on State Bank of India

Asset quality: Gross NPA additions amounted to Rs 36.06 bn (annualized NPA addition ratio of 0.5%) and recoveries and upgrades were also healthy at Rs 67.56bn Margin picture: Whole bank NIM at 3.15% was flat QOQ, with yield on advances and cost of deposits having remained flat sequentially Asset growth: Whole bank advances grew 5.8%/11% QoQ/YoY driven sequentially by corporate loans which saw higher utilization of sanctioned limits Opex control: Total opex grew/de-grew 12.1%/-1% QoQ/YoY, employee cost grew/de-grew 0.7%/-6.2% QoQ/YoY and other cost grew 29.1%/5.8% QoQ/YoY Fee income: Core fee income grew/de-grew 39.6%/-5.1% QoQ/YoY, driven sequentially by Loan Processing Charges and Remittance & Collection fees.

Outlook

We maintain ‘Buy’ rating on SBI with a revised price target of Rs 659: We value the bank at 1.35x FY23 P/BV for an FY23E/24ERoE profile of 14.3/15.8%. We assign a value of Rs 181 per share to the subsidiaries, on SOTP.