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SBI delivered on growth and asset quality, margins trajectory remains volatile

ICICIdirect Research 07 Feb 2025 DISCLAIMER

SBI reported mixed performance in Q3FY25. Steady performance was seen across growth, asset quality, credit cost, though margin erosion remained higher than anticipated.

Credit growth continued to remain broadly in-line with industry trend at 13.5% YoY, backed by MSME, agri and corporate segment. Deposit accretion remained steady at 9.8% YoY, contributed primarily by term deposit growth (13.5% YoY).

Asset quality continued to remain robust with slippages down 9 bps QoQ at 59 bps, GNPA down 6 bps QoQ at 2.07% and NNPA flat at 53 bps. Thus, credit cost remained under control at 37 bps and PCR remained broadly steady at ~74.7%.

Bank margins witnessed erosion of 13 bps QoQ at 3.01%, owing to moderation in growth in Xpress credit and increase in cost of liabilities. Surge in earnings at 84.3% YoY is optical, owing to one-off provision in Q2FY24.

Guidance on future growth remained steady (advances at 14-16%, deposit ~10% & RoA at ~1%).

SBI has demonstrated its strength in the last few quarters both on core operating performance and asset quality. We revise valuation multiple lower at 1.2x, thereby revising our target at ₹910 (earlier ₹1000), valuing subsidiaries at ₹206 per share. Maintain Buy rating on the stock.

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