Prabhudas Lilladher's research report on State Bank of India
SBI's PAT of Rs39.5bn (PLe: Rs20.5bn) was much higher than expectation on better NII growth and large benefit from investment MTM write back. Though lower provisions benefitted operationally weak fees & higher opex resulted in slower core PPOP growth. Slippages came off to Rs65.4bn which was much below trend levels and higher reductions helped in asset quality improvement. Although bank maintained its provisions rate to improve PCR levels to 56.9% up 295bps QoQ (non-technical PCR). Bank has been on steady path on its guidances but core challenges in medium term are improvement in NIMs beyond 3.5%, fee income sustained revival and loan growth on large balance sheet will keep restriction on ROE improvement which will be seen from credit cost normalization.
Outlook
We retain BUY with revised TP of Rs361 (from 355) based on 1.4x Sep-20 ABV and Rs84 for subs.
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Read More First Published on Feb 12, 2019 04:20 pm
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