BQ Prime's special research section collates quality and in-depth equity and economy research reports from across India's top brokerages, asset managers and research agencies. These reports offer BQ Prime's subscribers an opportunity to expand their understanding of companies, sectors and the economy.
ICICI Securities Report
State Bank of India stands out versus peer public sector banks with stable market share, strong digital capabilities, strong liability, retail franchise and management depth.
We believe the bank is in sweet spot with comfortable asset quality, strong visibility of more than 15% return on equity and credit growth in-line with system.
Post recent underperformance versus peer PSU banks, the valuation differential versus peers has also narrowed.
Risk return appears attractive with the stock trading at ~1.0 times FY25E adjusted book value.
We maintain ‘Buy' with an unchanged SoTP-based target price of Rs 730, valuing the stock at ~1.3 times FY25E core banking book and ~Rs 200 per share of subsidiaries.
Key risks are sharp moderation in growth and any spike in slippages.
We met Dinesh Khara, Chairman, SBI. Takeaways:
The bank has become quality conscious more than ever. Branch KRAs now include return on risk weighted assets versus focus on top-line earlier.
Credit growth to remain healthy at 13– 14% YoY; deposits growth to be a shade lower and thus a boost to credit deposits ratio.
Despite rising competition, SBI is confident of healthy growth in small and medium enterprise and retail.
Near-term net interest margin is likely to be broadly stable (or 5–7 basis points dip) QoQ.
Some rise in opex due to step-up in wage bipartite provisions.
The bank is making serious efforts to pare agri gross non-performing asset to single-digit.
SBI would rely on internal accruals for capital augmentation.
SBI endeavours to sustain the current (~1.2%) return on asset with pressure on opex to be offset by improving fee.
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