Buy State Bank of India; target of Rs 290: Prabhudas Lilladher

Prabhudas Lilladher's research report on State Bank of India

SBI reported a strong earnings of Rs45.7bn (PLe: 37bn) as it chose to make lower provisioning on lesser slippages of Rs28bn and adequate PCR of 70% & COVID provisions. NII growth of 15% YoY was very much in-line as margins saw slight bump-up of 11bps QoQ, while lower other income offset PPOP trajectory. Bank management is optimistic to end with a stress book of Rs600bn by FY21 with Rs200bn of restructuring and rest slippages (Rs200bn in H2) which look fairly low. Although, looking at the Rs140bn of pro-forma slippages in Q2FY21 we believe, stress to come through higher run-rate of slippages than restructuring, although policy of adequately providing covers risks.

Outlook

Retain BUY rating with revised TP of Rs290 (from Rs276) based on 0.7x core Sep-22 ABV & Rs152 for Subs as risk-reward remains attractive.

For all recommendations report, click here