Buy State Bank of India; target of Rs 340: ICICI Direct

ICICI Direct's research report on State Bank of India

Gross slippages came in at Rs 10888 crore vs. elevated Rs 14349 crore largely as expected. Corporate slippage was lower at Rs 3189 crore (Rs 3704 crore in Q1FY19), of which Rs 2392 crore was from watchlist. Absolute GNPA declined to Rs 205864 crore vs. Rs 212840 crore QoQ, GNPA ratio declined 74 bps QoQ to 9.95% while NNPA ratio declined 45 bps QoQ to 4.84% Provision moderated to Rs 12094 crore vs. Rs 19228 crore, led by a fall in both asset quality and investment provisions. Loan loss provision came at Rs 10184 crore (Rs 13037 crore in Q1FY19). PCR ratio increased to 70% vs. 69.25% QoQ. In corporate sector PCR is above 54%.

Outlook

We build in a holding company discount of 10% as the share of subsidiaries in SoTP continues to rise. We maintain our BUY recommendation on the stock.