Prabhudas Lilladher's research report on State Bank of India
While SBI saw a mixed quarter, management sounded confident about maintaining core profitability driven by 1) good quality growth given stronger underwriting 2) benign asset quality with lower net slippages and multi-year low GNPAs 3) healthy std. asset provision cushion of 80bps which could more than suffice for ECL impact and 4) plough back of profits and creating value without raising capital. Although core PPoP for Q4 missed PLe by 8.5% due to surge in opex, asset quality was better with GNPA at 2.78% (PLe 2.95%) led by lower net slippages. Loan growth guidance for FY24E has been tempered down to 12-14% and retail would drive accretion.
Outlook
SBI would not resort to hiking deposit rates as bank carries excess SLR of Rs4.0trn with cushion on LDR (72.3%). Shifting to Mar’25 core ABV we maintain multiple at 1.6x and raise SOTP based TP at to Rs770 from Rs730. Retain ‘BUY’.
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