LKP Research has given Buy recommendation for State Bank of India with a target price of Rs. 565 in its research report issued on May 16, 2022

LKP Research’s research report on State Bank of India

State Bank of India (SBIN) has delivered a stable result on operating and assets quality front. Reported gross slippages stood at ₹28bn v/s ₹23bn in the previous quarter. Its reported GNPA (3.97% v/s 4.5% in 3QFY22) and NNPA (0.97% v/s 1.34% in 3QFY22) improved noticeably along with stable PCR (incl. AUCA) of 90%. Furthermore SMA2 (2bps v/s 6bps) decreased considerably. The bank has witnessed better than expected advance growth (11.6% YoY & 6% QoQ) led by wholesale credit growth and stable deposit growth (10% YoY & 5.3% QoQ) sequentially with better liquidity position. Moreover the bank has reported PAT of ₹91bn (v/s ₹84bn in 3QFY22) on back of stable NII growth (15.3% YOY and Domestic NIMs: 3.36%) along with steady operating expenses. The 4QFY22 calculated ROA and ROE stood at 0.74% and 13% respectively. Management reiterated the target ROE of 15% in mid run.

Outlook

The bank has established total standard asset and contingent provision of ~₹306bn (112bps of net advances) as on 4QFY22. With improving asset quality, ample contingent buffer and strong growth outlook, we believe the ROE target of 15% is achievable in mid run. We recommend BUY with target price of ₹565.

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