Buy State Bank of India; target of Rs 380: Motilal Oswal
Motilal Oswal is bullish on State Bank of India has recommended buy rating on the stock with a target price of Rs 380 in its research report dated August 02, 2019.
August 06, 2019 / 04:42 PM IST
Motilal Oswal's research report on State Bank of India
SBIN reported tepid PAT of INR23.1b due to higher provisions of INR91.8b and muted treasury gains. NII grew 5% YoY (flat QoQ) to INR229.4b (affected by interest reversals of INR27.9b). Domestic NIM was flat QoQ at 3.0%. Other income increased 20% YoY to INR80.1b. Treasury gains were muted at INR4.8b. Opex growth moderated to 7% YoY (at INR177b), though the bank made pension provisions of ~INR40b on account of a decline in bond yields. Loan growth was at 14% YoY (-2% QoQ), driven by retail loans (+19% YoY), while the corporate book grew 12% YoY (-8% QoQ). Deposit base increased 7% YoY, with the CASA mix at 45.1% (45.7% in FY19). Fresh slippages increased to INR162.1b; however, higher write-offs of INR154.8b facilitated a 2.5% QoQ decline in GNPLs. The slippages trend remains elevated across segments, with corporate slippages at INR53.5b (of which one account of INR20b slipped due to a delay in signing of ICA), SME slippages at INR39.6b and agri slippages at INR42.4b. Provision coverage ratio was stable at 61% (79.3% including TWO). SBIN made additional provisions of INR23b toward two standard stressed accounts (HFC and renewable energy).
The bank's core operating profitability is likely to improve, led by expansion in margins and cost control, which will help mitigate some credit cost pressures. We, thus, revise our target price to INR380 (1.2x FY21E ABV). Maintain Buy.
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