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Stable margins, but higher opex limits RoA @1%

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

State Bank of India: Financial Snapshot (Standalone)

Slower growth, but stable margins

SBI continued to report slower growth at 13% YoY/3.4% QoQ in Q2FY24 mainly due to subdued corporate growth and some moderation in retail growth. Within retail, Xpress credit book continued to expand at a faster pace, while mortgage and other retail loan growth moderated a bit. Deposit growth was largely in line, with systematic growth at 12% YoY/3.5% QoQ, while CASA ratio slipped a bit to 40%. However, after a sharp dip in Q1, SBI managed to stabilize NIMs at 3.3% mainly due to better loan yields and slower expansion in deposit cost. 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 NIMs around current levels.

NPA ratio trends down leading to negligible provisions

Gross slippages normalized back from seasonally high levels during Q1 to a low of Rs41bn/0.5% of loans, while higher recoveries/write-offs led to a 21bps QoQ fall in GNPA ratio to 2.55%. The restructured pool continued to moderate to Rs208bn/0.6% of loans vs. 0.7% in Q4. The bank expects some RBI action (possibly via increasing RWA) on lowvalue unsecured loans, but it claims that the bank’s Xpress PL portfolio has no loans disbursed for

Retain BUY with a TP of Rs700

We largely retain our earnings estimates and expect the bank to deliver 1-1.1% RoA/16- 19% RoE over FY24-26E. We retain BUY with a TP of Rs700/share, valuing the standalone bank at 1.2x its Sep-25E ABV and subsidiaries/investments at Rs185/share. Despite lower CET 1 at <11%, the bank believes it can fund the current growth through internal accruals and is, thus, in no hurry to raise capital. Key risks: Severe macro dislocation and a prolonged elevated-rate environment hurting margins and leading to growth/asset quality disruption.

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