Emkay Global Financial's research report on State Bank of India
SBI continued to report moderate credit growth but sustained its NIM at 3.3% after a sharp dip in Q1. However, higher staff cost, including ad hoc provisions of Rs34bn amid increasing probability of wage revision at 14% vs. earlier 10% partly offset by negligible provisions, led to a 4% miss on PAT at Rs143bn/1% RoA (vs. 1.2% in Q1). Management continues to guide for 13-14% growth in FY24E, led by retail, which coupled with better LDR/consumption of on-balance-sheet liquidity, should help sustain NIM around current levels. The bank expects some RBI action (possibly via increasing RWA) on low-value unsecured loans, but it claims that the bank’s Xpress PL portfolio has no loans disbursed for <Rs50K and has an otherwise strong asset quality, as it is primarily for salaried government employees.
Outlook
We largely retain our earnings estimates and expect SBI to deliver 1-1.1% RoA/16- 19% RoE over FY24-26E. We retain BUY with a TP of Rs700, valuing the standalone bank at 1.2x its Sep-25E ABV and subsidiaries/investments at Rs185.
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