Buy State Bank of India; target of Rs 280: Motilal Oswal

Motilal Oswal 's research report on State Bank of India

SBIN’s Annual Report reaffirms our view that the bank is progressing well in its goal to deliver robust return ratios, although COVID-19 has cast uncertainty on the earnings trajectory. SBI is focused on building a granular and high-quality Retail portfolio. 39% of corporate loans are toward PSUs or govt. undertakings; ~61% of the Retail portfolio comprises home loans, while >95% of unsecured credit is offered to govt./PSU employees. SBI remains a deposit machine, and despite sharply cutting SA/TD rates, has further improved its deposit market share by 46bp to 22.8%. - On a segmental basis, Retail PBT grew 42% YoY despite a modest 8% YoY revenue increase, while loss in the Corporate segment narrowed sharply. Around 21.8% of customers have availed the benefit of moratorium, amounting to INR5.6t (23% in value terms), which is better than that for most peers. On the digitalization front, the YONO platform set a new record with ~46m+ downloads and ~21m+ registered users. SBIN has further guided to double the user base in the next six months. The bank has 13.4% market share in POS terminals, 29.4% in debit card spend, and 23.2% in mobile banking, etc.

Outlook

SBIN has demonstrated strong improvement in asset quality over the past two years, with the GNPA ratio declining to 6.1% from 10.9%, and fresh slippages moderating sharply to 2.2% in FY20, lower v/s many private peers. SBIN has prudently improved PCR, while the proportion of the moratorium book also stands lower than that of peers. We maintain BUY, with TP of INR280 (0.7x FY22E ABV).

State Bank of India 23062020-moti

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