SIB's earnings were relatively better in light of Kerala floods with flat NII growth on back of sustained loan growth of 15-16% YoY and controlled opex. Lower trading income continues to impact other income & PPOP, while MTM dispensation over four quarters has been also keeping provisions on higher side. Floods in Kerala did not hurt asset quality as was envisaged earlier with slippages of Rs2.13bn coming in lower than expectations but in-line with trends.
OutlookStock at 0.8x FY19 ABV remains attractive especially post recent correction and with no large impact from floods & risk of corporate slippage having lowered, hence we retain our BUY stance with revised TP of Rs22 based on 1.0x Sep-20 ABV (rolled over from Mar-20). What worries us is low provision cover of 33% (42% incl. technical w.off), lower CASA mx in tight liquidity scenario which will keep cost of funds up and consequently restrict recovery in NIMs.
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