Broker's call: SBI (Buy)

| Updated on August 05, 2019 Published on August 06, 2019


SBI (Buy)

CMP: ₹300.25

Target: ₹380

SBI reported PAT of ₹2,310 crore in 1QFY20 (40 per cent below JMFe), with the bottomline miss largely led by provisions (₹9,200 crore, 20 per cent above JMFe). Slippages were elevated in 1QFY20 (₹17,000 crore, 3.4 per cent annualised), with corporate slippages contributing 33 per cent. As a result, specific credit costs were elevated at 2.3 per cent. The SMA pool of the bank is now at ₹10,300 crore (0.5 per cent of loans) — however, the bank has also disclosed another pool of accounts (₹19,100 crore) where inter-creditor agreements are to be signed/likely to be signed in the near future.

Ex-overlaps, the total stress pool of the bank is now at ₹26,800 crore (1.3 per cent of loans). The stress pool includes 2 lumpy accounts (totalling c.₹14,000 crore) — a stressed HFC and a renewable energy solutions provider on which the bank holds total provisions of c.16 per cent (₹2,300 crore). We factor in the increase in the stress pool in our credit cost estimates – we now build slippages of 2.4 per cent (vs 2 per cent earlier) in FY20E, and as a result build credit costs of 1.3 per cent in FY20E (i.e. ₹32,100 crore vs ₹21,500 crore earlier). Consequently, our earnings estimates for FY20E have been cut by c.27 per cent.

Published on August 06, 2019
This article is closed for comments.
Please Email the Editor