Buy SBI; target of Rs 284: Geojit BNP Paribas

SBI is the largest commercial bank in India with over 1/5th market share of the Indian banking sector. It has a strong domestic presence with 16,784 branches and international presence with 198 branches across 36 countries.  NII increased marginally by 4% YoY (in line with our expectation) as margin remained under pressure on the back of incremental disbursements into low yielding corporate loans. Operating profit increased at a healthy pace of 20% YoY supported by higher other income (44% YoY). Gross NPA ratio which increased by 44 bps sequentially to 6.9% (better than expected) due to lower fresh slippages of Rs 8,790cr (Rs 30,313cr in Q4FY16). We expect advances to increase at a CAGR of 11% over FY16-18E led by lending to high rated corporates and retail segment. We expect net profit to increase at a CAGR of 37% over FY16-18E on the back of declining provisioning expenses. SBI is trading at a discount to its five years mean (2.1x 1 Year Forward P/ABV) valuation. We assign BUY rating on the stock with target price of Rs 284 based on SOTP methodology. For all recommendations, click here Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.