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Target: ₹565
CMP: ₹455.15
State Bank of India (SBIN) has delivered a stable result on operating and assets quality front. Reported gross slippages stood at ₹2,800 crore v/s ₹2,300 crore in the previous quarter. Its reported GNPA (3.97 per cent v/s 4.5 per cent in Q3-FY22) and NNPA (0.97 per cent v/s 1.34 per cent in Q3-FY22) improved noticeably along with stable PCR (incl. AUCA) of 90 per cent.
Furthermore SMA2 (2bps v/s 6bps) decreased considerably. The bank has witnessed better than expected advance growth (11.6 per cent YoY & 6 per cent QoQ) led by wholesale credit growth and stable deposit growth (10 per cent YoY & 5.3 per cent QoQ) sequentially with better liquidity position.
Moreover the bank has reported PAT of ₹9,100 crore (v/s ₹8,400 crore in Q3-FY22) on back of stable NII growth (15.3 per cent y-o-y and Domestic NIMs: 3.36 per cent) along with steady operating expenses. The Q4-FY22 calculated ROA and ROE stood at 0.74 per cent and 13 per cent respectively.
Management reiterated the target ROE of 15 per cent in mid run. The bank has established total standard asset and contingent provision of about ₹30,600 crore (112bps of net advances) as on Q4-FY22. With improving asset quality, ample contingent buffer and strong growth outlook, we believe the ROE target of 15 per cent is achievable in mid run.
We recommend Buy with target price of ₹565.
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