Target: ₹700

CMP: ₹607.75

Motilal Oswal’s met Dinesh Kumar Khara, Chairman, State Bank of India recently.

Key insights are: Loan growth remains healthy, led by Retail loans and a pick-up in the Corporate segment; and the Housing segment remains strong (disbursement up 35 per cent YoY), with falling unsold inventory levels; in the Corporate segment, working capital utilisation/new sanctions grew 54 per cent /46 per cent, driven by term loans and loans to NBFCs, Oil majors and the Infrastructure sector.

There has been some moderation in loan growth in 3QFY23. Nevertheless, it expects a loan growth of 14-16 per cent in FY23, while growth in FY24 will depend on the global macro environment.

The bank’s international book is growing at a healthy pace, led by receivables financing, syndicate loans, and ECB loans to well-rated Indian corporates.

SBIN’s robust performance has been aided by strong loan growth, margin expansion, and lower provisions. The improvement in its treasury performance and controlled OPEX led to a healthy growth in core PPOP. A high mix of floating loans, which will benefit from the re-pricing of loans, will continue to aid NII and earnings, even as the cost of deposits may see some increase.

We maintain our Buy rating with a target price of ₹700 (1.4x FY24E ABV and INR192 for its subsidiaries).