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SBIN reported a steady quarter with in-line NII of INR 395bn (+1.5% QoQ, +12% YoY) as domestic NIMs remained largely stable at 3.43% (-4bps QoQ). International NIMs was also down -5bps QoQ at 2.19%. Higher opex from revision in wage provisions led to a PPoP of INR 194bn (-23% QoQ, -8% YoY, -4.3% JMFe). Lower provisions (0.23% credit costs) due to write-back of provisions worth INR 8.2bn resulted in PAT beat of +9.7% at INR 143bn (+8% YoY,-15% QoQ). Loan growth was healthy (+3.4% QoQ, +13% YoY) at INR 33.5trln and deposits growth was also strong (+3.5% QoQ, 12% YoY) at INR 47trln. Loan growth was well-rounded across sectors and management maintained its growth guidance of 14% going ahead. Asset quality improved sequentially with GNPL of 2.55% (-21bps QoQ) and NNPLs of 0.64% (-7bps QoQ). PCR for the bank remains strong at 75.4%. Mgmt expects CET1 to reach ~11% by Mar’24 (from current levels of 9.9%) driven by strong profitability in FY24E. We believe delivery of growth on guided lines, sustenance of NIMs near current levels and controlled asset quality parameters aiding controlled credit costs should lead to strong profitability going ahead. We build in RoA/ RoE of 1.0%/17.5% for FY25E. We value the core banking business at 1.2x FY25E P/BV and we arrive at our SoTP-based target price of INR 710. Maintain BUY

*Healthy loan growth: SBIN reported a healthy loan growth of +13% YoY driven by growth across all the segments: retail and SME grew at +16% YoY and +23% YoY respectively while corporate and Agri grew at +11% YoY and +15%YoY. Retail loan growth was driven by Auto loans, other P segment loans and Xpress credit (+18% YoY, +20% YoY and +22% YoY resp.). Management maintains a loan growth guidance of 14% going ahead. Deposit growth was at +3.5% QoQ led by a) +5.3% QoQ growth in time deposits, and b) +1.1% QoQ growth in domestic CASA deposits. CASA ratio stands at 41.9% (-100bps QoQ). We build in 14% credit growth and 11% deposits growth over FY24-25E.

* Higher employee costs offset by lower provisions: NII stood at INR 395bn (+1.5% QoQ, +12% YoY). Higher opex (+20% QoQ, +35%YoY) led by revision in employee wage provisions from earlier 10% to 14% and rise in other opex resulted in the decline in PPOP at INR 194bn (-23% QoQ, -8% YoY). Mgmt. guided that there would be additional provisions of INR 4bn per month for this revision in employee wages. Core PPOP de-grew - 16% YoY. Lower LLP charge of 23bps (vs 35bps QoQ) on account of write back of INR 8.2bn (from sale of loans to ARC) led to a beat in PAT at 143bn (+8% YoY and -15% QoQ). Domestic NIMs declined to 3.43% (-4bps QoQ) and management indicated that SBI is in a position to hold NIMs at current levels for remaining quarter with 3-5bps maximum compression due to increase in cost of deposits. International NIMs were down -5bps QoQ.

*Asset quality remains intact: Slippages remain under control at INR 41bn (vs INR 79bn QoQ) which coupled with recoveries and upgrades (INR 40bn) and write-offs (INR44bn) led to asset quality improvement with GNPL/NNPL of 2.55%/0.64% (-21bps/-7bps QoQ). Restructuring pool improved to 0.62% (vs 0.7% QoQ). SMA 1 and 2 also improved to 0.12% (vs 0.22% QoQ and 0.29% YoY). Provision costs were low at 0.23% (vs 0.35% QoQ) and SBI continues to hold healthy provision cover of 75.4% against NPAs which

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