Target: ₹665
CMP: ₹466.9
Despite multiple headwinds, SBI managed to steer through the pandemic and delivered a strong credit growth revival in FY22, largely driven by growth in its retail segment, a reduction in slippages, and robust asset quality. The bank’s focus on high-quality customers across retail, SME, and corporate along with building a more granular book enabled it to strengthen its overall operating and balance sheet performance over FY18-22.
SBI’s slippage was down 12.4 per cent year-on-year; the G/NNPA at 3.97/1.02 per cent for FY22 improved 101/48 bps from FY21. Its capital adequacy ratio increased to 13.8 per cent in FY22 and tier-1 capital remained stable at 11.4 per cent, representing a strong capital base against unforeseen risk and stressed pool of assets.
Its key competitive strengths include: Strong unsecured lending profile with over 90 per cent to salaried government employees; strong market presence in home and auto loans; high-quality wholesale loan book with more than 75 per cent of corporate loan portfolio rated A and above; and about 45 per cent of corporate loans towards government undertakings and PSUs.
We believe normalisation in credit costs and improved growth outlook should lead to ROEs of 14-15 per cent over FY23-24.