IGI Logo

Margin declines 27bp QoQ; Other income drives earnings Asset quality remains steady

* SBIN reported a mixed quarter as NII declined 4% QoQ (6% miss), led by a sharp 27bp QoQ decline in NIM to 3.33%. PAT was up 178% YoY at INR168.8b (23% beat), aided by treasury gains of INR38.5b.

* Slippages stood at INR79b in a seasonally weak quarter though the GNPA/NNPA ratios stood broadly stable at 2.76%/0.71%. Restructured book declined to INR227b (70bp of advances).

* We broadly maintain our earnings estimates, as other income and opex control offset the NIM moderation. We estimate FY25E RoA/RoE of 1.0%/17.8%. We reiterate our BUY rating with an unchanged TP of INR700 (based on 1.1x FY25E ABV + INR206 from subs).

NII grows 25% YoY; Restructured book declines to 70bp

* SBIN reported 178% YoY growth in net earnings to INR168.8b (23% beat), mainly propelled by higher treasury income and lower opex. NII declined 4% QoQ (6% miss, up 25% YoY) as margin contracted 27bp QoQ to 3.33% (domestic NIMs at 3.47%). ? Other income grew 4.2x YoY to INR120.6b, resulting in total revenue of INR509b (in line). The bank reported treasury gains of INR38.5b vs. INR18b in 4QFY23, while core fees grew 4% YoY to INR66b.

* Opex grew 24% YoY (down 14% QoQ) as the bank made INR15b towards wage revision in 1QFY24. PPoP rose 98% YoY to INR253b, while core operating profit grew 11% YoY.

* Gross Advances grew ~14% YoY (flat QoQ), aided by 17% YoY growth in the Retail book (37% of advances). While Agri and SME loans grew strongly at ~15%/18% YoY each, the Wholesale book grew 12% YoY (flat QoQ). Xpress Credit and vehicle loans grew 20%/23% YoY, while home loans, which forms 66% of retail advances grew 14% YoY (up 2% QoQ). Deposits grew 12% YoY (up 2.4% QoQ), with the CASA mix moderating to 42.9% (down 90bp QoQ).

* Slippages increased to INR79b in a seasonally weak quarter though the GNPA/NNPA ratios stood stable at 2.76%/0.71%. The restructured book declined to INR227b (0.7% of advances), while the SMA 1/2 portfolio increased to INR72.2b (22bp of loans).

* Subsidiaries reported mixed performance: SBICARD clocked a PAT of INR5.93b (down 5.4% YoY). SBILIFE’s PAT grew 45% YoY (down 51% QoQ) to INR3.8b. PAT of the AMC business grew 88% YoY to INR4.7b, while SBI General reported a PAT of INR710m vs. INR550m in 4QFY23.

Highlights from the management commentary

* Systemic credit growth is expected to be ~12%-14% in FY24.

* The bank reported an ROA of 1.2% in 1QFY24. 

For More Motilal Oswal Securities Ltd Disclaimer http://www.motilaloswal.com/MOSLdisclaimer/disclaimer.html

SEBI Registration number is INH000000412