LKP Research's research report on State Bank of India
State Bank of India (SBIN) has delivered a strong result on operating and assets quality front. It’s reported GNPA (2.78% v/s 3.14% in 3QFY23) and NNPA (0.67% v/s 0.77% in 3QFY23) holds steady with stable PCR (incl. AUCA) of 92%. Furthermore SMA1/2 (8bps v/s 2bps) decreased meaningfully. The bank has witnessed better than expected advance growth (17% YoY & 4.6% QoQ) led by growth across segment and steady deposit base (9.2% YoY & 5% QoQ) sequentially with better liquidity position. Moreover the bank has reported highest ever quarterly PAT of ₹166bn (v/s ₹142bn in 3QFY23) on back of healthy NII (Domestic NIMs: 3.58%) and lower loan loss provision (credit cost: 16bps). The 4QFY23 calculated ROA and ROE stood at 1.23% and 20.4% respectively; surpassing the ROE target of 15%.
The bank has established total standard asset and contingent provision of ~₹338bn (109bps of net advances) as on 4QFY23. With improving operating environment, ample contingent buffer (against ECL provisions) and strong growth outlook, we believe the annual ROE target of 15% is achievable in FY24E/25E. Therefore, we recommend BUY with target price of ₹743.
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