IGI Logo

Strong performance enthuses…

About the stock: SBI is a public sector bank and also the largest bank in India with a balance sheet size of ~ | 48 lakh crore

Strong liability franchisee with trend setting abilities in terms of rates

Best operating metrics in the PSU banking space

Q3FY22 Results: Healthy performance on the asset quality front and growth.

GNPA down 40 bps QoQ to 4.5%, restructured book at 1.2% of loans

NII up 6.5% YoY, NIM down 9 bps QoQ to 3.2%, C/I ratio at 52.9%

Provisions at | 6974 crore, PAT up 62.3% YoY at | 8431 crore

Gross advances up 8.5% YoY (higher than estimates) and deposits up 8.8% YoY, CASA at 45.7%

What should investors do? SBI’s share price has surged over 2x in the past five years. We believe overall strength in liability franchisee, >9% guidance on growth and improving return ratios with RoE touching 12-13% should be positives for SBI.

We retain our BUY rating on the stock

Target Price and Valuation: We value the bank at ~1.22x FY24E ABV and subsidiaries at ~| 192 per share to arrive at a revised target price of | 650.

Key triggers for future price performance:

Strong performance on asset quality front is a positive

Healthy pipeline to aid business growth and overall performance

Healthy provisions worth around 1.1% provide comfort on earnings shock

Improving RoE trajectory to aid improvement in valuations

Alternate Stock Idea: Besides SBI, in our coverage we also like Bank of Baroda

Bank of Baroda is among leading PSU banks with a global exposure and relatively better operating metrics among PSBs

BUY with a target price of | 120

To Read Complete Report & Disclaimer Click Here

https://secure.icicidirect.com/Content/StaticData/Disclaimer.html

Views express by all participants are for information & academic purpose only. Kindly read disclaimer before referring below views. Click Here For Disclaimer