Broker's call: State Bank of India (Buy)

Target: ₹340

CMP: ₹281.05

SBI's GNPA has steadily declined to 5.3 per cent since FY18. This is the lowest among PSBs and even better than that of ICICI. The bank also expects limited stress after Covid-19, given its relatively resilient retail book that includes secured mortgages and unsecured PL built largely around salaried government employees.

ECLGS/restructuring should limit the stress in the otherwise risky SME portfolio. Improving prospects of resolutions in some large corporates should further reduce corporate NPAs. The bank now carries strong PCR on NPAs (71 per cent), driven by strong PPoP on healthy margins and value unlocking in subsidiaries and investments.

After unlocking, retail growth is swiftly moving toward pre-Covid level. This is driven by home loans in which SBI has a leadership position and auto loans where it has made deep inroads withcompetitive rates. The bank also expects a revival in corporate credit with better utilisation of WC limits across sectors. Disbursements under ECLGS and enhanced focus on supply-chain financing of its strong corporate pool should also ensure healthy growth in the SME business.

Management believes that 'Digital' is going to be the soul of future banking. It feels that SBI has a strong digital platform across asset/liability verticals to drive growth/fees, contain costs and improve core RoAs.