MOSL: STATE BANK OF INDIA (Buy)-Gaining momentum in earnings; asset quality outlook strong
STATE BANK OF INDIA: Gaining momentum in earnings; asset quality outlook strong
(SBIN IN, Mkt Cap USD55b, CMP INR457, TP INR600, 31% Upside, Buy)
SMA/Restructured portfolio under tight control
- State Bank of India (SBIN) reported a steady quarter, with an earnings beat of 12% on MOSLE. This was aided by controlled provisions despite a challenging environment. Core operating performance was in-line.
- Asset quality ratios deteriorated marginally on elevated slippage in Retail/SME. However, the management clarified that slippage worth ~INR48b has already been recovered/upgraded in July’21. Furthermore, the total restructured book remained in check, while SMA 1/2 (exposure of >INR50m) was stable QoQ at INR113b (~0.5% of loans).
- The bank is gaining momentum in earnings every quarter. Thus, we estimate SBI to deliver FY22/FY23 RoE of 13.1%/14.6%, even as we build in credit cost of 1.6%/1.3% for FY22E/FY23E. Maintain BUY, with revised TP of INR600 (1.4x FY23E ABV + INR193 from subs).
State Bank of India provides a range of products and services to personal, commercial enterprises, large corporates, public bodies and institutional customers. Its segments include Treasury, which includes the entire investment portfolio and trading in foreign exchange contracts and derivative contracts; Corporate/Wholesale Banking, which comprises the lending activities of Corporate Accounts Group, Mid Corporate Accounts Group and Stressed Assets Management Group; Retail Banking, which comprises branches in National Banking Group, which primarily includes Personal Banking activities, including lending activities to corporate customers having banking relations with branches in the National Banking Group, and Other Banking Business, which includes the operations of all the Non-Banking Subsidiaries/Joint Ventures other than SBI Life Insurance Co. Ltd. and SBI General Insurance Co. Ltd. The Company had approximately 22,500 branches and 58,000 ATMs.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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