Buy State bank of India; target of Rs 285: Axis Direct

Axis Direct's research report on State Bank of IndiaState Bank of India (SBIN)’s Q1FY17 PAT of Rs 25.2 bn (down 32% YoY) beat our estimates due to lower-than-expected provisions (Rs 74 bn). Though headline asset quality deteriorated 44 bps QoQ (GNPAs of 6.9%), slippages (Rs 108 bn; 3.2% of loans) were significantly lower than expected. This allays concerns of a continued deterioration in the quality of the book, which has been observed in other PSU banks. Operating metrics remained strong, with advances & deposits growing 11% YoY each. CASA (41%) both on an end-of-period and on daily average basis showed improvement. NIM (2.8%) was resilient (lower only 13 bps QoQ) despite lending to better rated assets. Capital position (CAR of 14%) improved led by revaluation of real estate assets, sale of non-core assets and QoQ consolidation of corporate loan book.