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

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26 Aug, 2025 12:21

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ICICI Direct's research report on State Bank of India

Asset quality surprised positively. Gross slippages came in at Rs 6541 crore vs. Rs 10888 crore in Q2FY19 of which fresh slippages were only Rs 4523 crore. Corporate slippage came in lower at Rs 1300 crore vs. Rs 3189 crore QoQ. Absolute GNPA was at Rs 187765 crore vs. Rs 205864 crore QoQ, led by lower slippages and higher write-offs at Rs 18024 crore. Consequently, GNPA ratio declined ~124 bps QoQ to 8.71% from 9.95% while NNPA ratio declined ~89 bps QoQ to 3.95% Provision declined sharply from Rs 12094 crore to Rs 6007 crore, led by a sharp reversal in investment MTM provisions of Rs 7994 crore. Loan loss provision came in at Rs 13971 crore vs. Rs 10184 crore QoQ (Rs 13037 crore in Q1FY19). This boosted PAT to grow to Rs 3954 crore vs. loss in Q3FY18 and marginal PAT of Rs 944 crore in Q2FY19 NII grew 21.4% YoY to Rs 22691 crore, above our estimate of Rs 22132 crore, led by strong loan growth. Global net interest margin (NIM) was at 2.76%. NIM (domestic) increased 3 bps QoQ. Domestic NIM was at 2.92%, up 4 bps QoQ.

Outlook

We maintain our target price at Rs 340, valuing the standalone bank at 1.6x FY21E ABV ((Rs 140/share) and subsidiaries at Rs 100 per share. We build in a holding company discount of 10% as the share of subsidiaries in SoTP continues to rise. We maintain our BUY rating on the stock as the bank continues to improve operationally.

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