Prabhudas Lilladher's research report on SBISBIN reported relatively better quarter with fresh slippages standing at Rs207bn (6.2% annualized, ~72% due to RBI AQR) thus leading to 95bp QoQ increase in GNPL ratio to 5.1%. Bank mentioned that it will implement RBI's AQR over two quarters and has guided for similar level of slippages in Q4FY16 but significant improvement from FY17 onwards. While the deterioration in asset quality is significant we believe that it will help take away the overhang of asset quality and SBI is still best positioned amongst PSUs to handle the ongoing developments and likely emerge stronger. We cut our estimates to factor in the current trends and lower our PT to Rs235 (from Rs350) ‐ 1.0x Sep‐17E ABV. We maintain BUY & believe that the stock presents an attractive buying opportunity over the medium term. SBIN has aggressively cut base rate recently however we expect margins to sustain at around current levels as deposit portfolio re‐prices lower, more so in Q1FY17 while the extent of interest reversals will also decline. SBIN remains one of the well capitalized PSU bank and we expect earnings to gain traction from next fiscal. Maintain BUY with PT of Rs235 (from Rs350) based on SOTP valuation.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.
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