Buy State Bank of India; target of Rs 400: ICICI Direct

ICICI Direct is bullish on State Bank of India has recommended buy rating on the stock with a target price of Rs 400 in its research report dated May 13, 2019.

Broker Research

May 13, 2019 / 05:43 PM IST

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ICICI Direct's research report on State Bank of India

State Bank of India (SBI) reported a stable operational performance though higher provisions dented PAT that was at Rs 838 crore. NII grew 14% YoY to Rs 22953 crore on the back of a marginal improvement in margins of 2 bps QoQ to 2.78% & credit growth of 13% YoY at 21.93 lakh crore. However, interest reversal for aviation account & IL&FS impacted NII. Ageing provisions for NCLT 1 & NCLT 2 companies led to a surge in provisions for NPA to Rs 17336 crore vs. Rs 13971 in Q3FY19. However, a reversal in investment depreciation of Rs 1615 crore kept provisions marginally lower at Rs 16502 crore. Accordingly, PAT came in lower at Rs 838 crore vs. Rs 3594 crore in Q3FY19. Overall PCR ratio increased to 78.73% from 74.6% QoQ.

Outlook

We upgrade the target price to Rs 400 from Rs 385, valuing at 1.5x FY21E ABV, factoring in higher profit estimates and improved (0.8%) RoE (12-13%) guidance. We reiterate BUY on dwindling asset quality woes.

For all recommendations report, click here