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Result and Price Analysis

State Bank of India (SBIN) has delivered a strong result on operating and assets quality front. It’s reported GNPA (2.78% v/s 3.14% in 3QFY23) and NNPA (0.67% v/s 0.77% in 3QFY23) holds steady with stable PCR (incl. AUCA) of 92%. Furthermore SMA1/2 (8bps v/s 2bps) decreased meaningfully. The bank has witnessed better than expected advance growth (17% YoY & 4.6% QoQ) led by growth across segment and steady deposit base (9.2% YoY & 5% QoQ) sequentially with better liquidity position. Moreover the bank has reported highest ever quarterly PAT of ?166bn (v/s ?142bn in 3QFY23) on back of healthy NII (Domestic NIMs: 3.58%) and lower loan loss provision (credit cost: 16bps). The 4QFY23 calculated ROA and ROE stood at 1.23% and 20.4% respectively; surpassing the ROE target of 15%. The bank has established total standard asset and contingent provision of ~?338bn (109bps of net advances) as on 4QFY23. With improving operating environment, ample contingent buffer (against ECL provisions) and strong growth outlook, we believe the annual ROE target of 15% is achievable in FY24E/25E. Therefore, we recommend BUY with target price of ?743.

Gazing the core

Higher upgrades/recoveries led to GNPA reduction: The bank’s slippages were suggestively higher sequentially at ?32bn (v/s ?31bn) and recoveries (?42bn v/s ?16bn) were higher too. Moreover, bulky write-offs (?66bn) led to decrease in GNPA ratio to 2.78% v/s 3.14% in the previous quarter. The bank’s asset quality improved meaningfully as reported GNPA/NNPA/PCR ratio stood at 2.78%/0.67%/92% against 3.14%/0.77%/92% in 3QFY23. GNPA ratio of retail, agriculture, SME and corporate segment stood at 3%, 11.5%, 4.8%, and 3.5% respectively. Additionally, The Bank’s SMA 1 (?25bn, 8bps) and SMA 2 (?8bn, 2bps) narrowed down. Moreover, BB & below book flat 11% of wholesale book. The bank has established total provision outside PCR of ~?338bn (111bps of net advances) as on 3QFY23. The restructured pool came down to ?243bn (76bps of net advances) from ?260bn (85bps) in the previous quarter. Management expects the pool to stay stable in near term.

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