Buy State Bank of India; target of Rs 240: Emkay Global Financial

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26 Aug, 2025 12:21

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Emkay Global Financial's report on State Bank of India

SBI reported a PAT of Rs41.8bn (est. Rs31bn), aided by strong NIMs, low opex and one-off gains of Rs15.4bn from the stake sale in the insurance subsidiary. However, cumulative Covid-19 provisions at Rs30bn (13bps of loans), including Rs18.4bn in Q1, are still lower than peers and thus, need to be shored up. The GNPA ratio improved 71bps qoq to 5.4% on lower slippages due to the standstill benefit. The moratorium rate on TL stood at 9.5% (customers who have paid more than two EMI) from 22% in Phase 1, but is not strictly comparable with other banks. SBI remains reasonably capitalized by PSB standards, with CET 1 at 10.1% and additional Tier I of 1.2%. Thus, management believes that there is no hurry to raise fresh equity capital unless the bank sees sustainable strong growth trajectory.

Outlook

We like SBI among PSBs for its strong liability profile, high retail orientation, reasonable capital position and cheap valuations (0.3x FY22E core ABV). We retain Buy/EW in EAP, with a revised TP of Rs240 (0.4x core Sep’22E core ABV + subs valuation of Rs109). Asset-quality momentum and MD transition remain key monitorables.

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