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State Bank of India>
  • CMP : 751.7 Chg : -5.80 (-0.77%)
  • Target : 605.0 (35.96%)
  • Target Period : 12-18 Month

16 May 2022

Strong performance enthuses

About The Stock

SBI is a public sector bank and also the largest bank in India with a balance sheet size of over ~ ₹ 54 lakh crore.

  • Strength in retail portfolios and best operating metrics in the PSU banking space
  • Large subsidiaries, strong outlook adding value to the banks
Q4FY22

SBI reported stellar credit growth and improving asset quality

  • GNPA down 53 bps QoQ to 3.97%, total non-NPA provisions at ₹ 30629 crore
  • NII up 15% YoY, NIM stable QoQ at 3.4%, C/I ratio rose to 54%
  • Provisions at ₹ 7214 crore down 35% YoY, PAT up 41% YoY at ₹ 9114 crore
  • Gross advances up 11% YoY (higher than estimates) and deposits up 10% YoY, CASA at 45.3%
What should Investors do?

SBI’s share price has surged over 2.2x in the past five years. We believe overall strength in lending franchise and liability growth >9% guidance along with a well provisioned book remain positives. Improving return ratios with RoE touching 12-13% and RoA reaching 0.7-0.8%, offer long term visibility for the stock.

We retain our BUY rating on the stock

Target Price Valuation

We value the bank at ~1.1x FY24E ABV (from 1.2x) and subsidiaries at ~₹ 186 per share to arrive at a revised target price of ₹ 605 from ₹650 earlier

Key Triggers for future price performance
  • Strong performance on the asset quality front is a positive
  • Healthy pipeline to aid business growth and overall performance
  • Healthy provisions worth around 1.1% provide comfort on earnings shock
  • Improving RoE trajectory to aid improvement in valuations
New Stock Ideas

Besides SBI, in our coverage we also like Axis Bank

  • Strong liabilities franchise, adequate capitalisation and healthy provision buffer to aid business growth as well as earnings trajectory
  • BUY with a target price of ₹ 970

Key financial summary

| Bn FY19 FY20 FY21 FY22 3 Year CAGR
(FY19-22)
FY23E FY24E 2 Year CAGR
(FY22-24E)
NII 883 981 1107 1207 11% 1365 1577 14%
PPP 539 681 716 753 12% 886 1058 19%
PAT                      9                145                204                317 232%         396         471 22%
ABV (|) 174.0 203.2 243.3 282.6   328.9 383.5  
P/E                  473                  27                  19                  13             10             8  
P/ABV 2.6 2.2 1.8 1.6   1.4 1.2  
RoA 0.0 0.4 0.5 0.7   0.8 0.8  
RoE 0.5 6.4 8.4 11.9   13.2 13.7  

 

 

Variance


  Q4FY22 Q4FY22E Q4FY21 YoY (%) Q3FY22 QoQ (%) Comments
NII 31,198 31,355 27,067 15.3 30,687 1.7 Driven by pick up in loan growth
NIM (%) 3.2 2.7 2.9 25 bps 3.2 0 bps Stable marings sequentiallay as funding cost remained under control
Other Income 11,880 11,762 16,225 -26.8 8,673 37.0  
               
Net Total Income 43,078 43,117 43,292 -0.5 39,360 9.4  
Operating expense 23,361 22,303 23,592 -1.0 20,839 12.1 Sequentially rise in opex as business activity rises
PPP 19,717 20,814 19,700 0.1 18,521 6.5  
Provision 7,212 9,900 11,051 -34.7 6,974 3.4 Provisions flat QoQ and down YoY as asset quality improves
PBT 12,504 10,914 8,649 44.6 11,547 8.3  
Tax Outgo 3,366 2,783 2,198 53.1 3,116 8.0  
PAT 9,139 8,131 6,451 41.7 8,431 8.4 PAT boosted by reduced provisions
               
Key Metrics              
GNPA 1,12,023 1,18,529 1,26,389 -11.4 1,20,028 -6.7  
NNPA 27,966 36,130 36,810 -24.0 34,530 -19.0  
Advances 2733967 2673787 2449498 11.6 2578386.46 6.0 Driven by retail and corporate mix
Deposits 4051534 4012592 3681277 10.1 3847794 5.3 Helped by CASA


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