Buy State Bank of India; target of Rs 360: JM Financial

JM Financial's research report on State Bank of India

SBIN's 4QFY18 loss of INR 77.2bn marks large cleanup of balance sheet with a) Non-NPL stressed loans declining to just 1.9% of loans, b) 180 bps increase in provision cover on a QoQ basis to 50.4%. Moreover, management has indicated that this new watchlist subsumes all ex-NPL stress on the loan book, and includes all corporate SMA2 loans as well as some SMA1 loans.

Outlook

We believe there could be a potential upside risk to our RoA estimates as credit cost returns to normalcy. We value SBIN at 1.5x fully adjusted FY20E BVPS with subsidiaries contributing INR 82 to our TP. Maintain BUY with revised 12M TP of INR 360/sh.