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MOSL: STATE BANK OF INDIA (Buy)-RoA progression in sight-execution remains the key

STATE BANK OF INDIA: RoA progression in sight; execution remains the key

(SBIN IN, Mkt Cap USD36.5b, CMP INR290, TP INR370, 28% Upside, Buy)

 

We attended State Bank of India’s (SBIN) investor day, wherein it discussed the business strategy/future roadmap for the group and also provided the baseline guidance on the key financial parameters for FY20/21. Management talked about the progress on ongoing resolutions and how the Stressed Assets Resolution Group (SARG) is helping the bank to maintain a healthy recovery run-rate. Besides, management highlighted the growth potential of different subsidiaries, SBIN’s core business, and how YONO and other digitization initiatives have transformed the credit delivery for the bank. Key takeaways:  

Opening remarks from Mr Rajnish Kumar – Chairman

RoA to improve to 0.9-1% by FY21: SBIN’s management provided the baseline guidance on the key financial parameters for FY20/21. It expects the bank to deliver an RoA of 0.4%-0.5% in FY20 and 0.9%-1.0% in FY21, led by (a) credit growth of ~10%/12% with an NIM of 3.15%-3.2%, translating into NII growth of 17%/14% for FY20/21, (b) non-interest income growth of 15% for both years with opex growth sustaining at <10% and (c) a slippage ratio of 2.0%/1.3% in FY20/21, leading to credit cost of 1.8%/1.0%. Corporate slippages are guided at INR220b/INR120b for FY20/21, significantly lower than the historical run-rate.