Buy State Bank of India; target of Rs 960: Prabhudas Lilladher

Prabhudas Lilladher's research report on State Bank of India

SBI saw a decent quarter; while core PPoP beat PLe by 11.3% due to better fees and TWO recoveries, asset quality was soft as provisions were higher at 66bps (PLe 25bps) since (1) write-offs/ageing provisions were more and (2) strong TWO recovery and SR reversal (Rs39bn) provided leeway to front load credit costs. Credit growth is guided to be above system in FY26E; we are factoring a 12% CAGR over FY25-27E. Opex for FY25 was flat at Rs1.18trn due to 9.7% decline in staff cost. For FY26, bank has guided a cost to income of 50-51% with staff cost increase of 6%.

Outlook

We are factoring a higher cost to income at ~54% as salary provisions could be more, following rate cuts. With core RoA of 0.9x in FY27, stock is trading at 1.0x. We keep multiple at 1.3x but raise SOTP-based TP to Rs960 from Rs900 as we roll forward to Mar’27 core ABV. Retain ‘BUY’.