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Yes Securities Report
State Bank of India's gross non performing asset additions had amounted to Rs 34.58 billion during Q4 FY23 but the annualised NPA addition ratio of 1.0% for Q1 FY24 was eminently under control in the absolute sense. Provisions were Rs 25.0 billion, down by -24.6% QoQ and -43.1% YoY, translating to annualised credit cost of 32 bps, which is materially low.
Excluding one-offs, the sequential contraction in net interest margin would be 15 bps. Management guided that the bank would strive to maintain the current margin level of 3.47%. They added that the term deposit rates had been changed in certain buckets and the repricing has played out.
About Rs 1.2-1.4 trillion worth of term deposits have been churning every month. The cost of deposits should stay stable now for some time to come
SBI expects system loan growth to be 14-15% and the bank's growth to be similar. There is a Rs 3.5 trillion corporate proposal pipeline of which Rs 1.2 trillion has already been sanctioned.
The retail loan growth three-year compound annual growth rate has been 17% and the bank would continue to grow similarly.
Management clarified that the current level of capital is sufficient to support a loan book growth of Rs 7 trillion without additional capital raise.
We value the bank at 1.1 times FY25 price/book value for an FY24E/25E/26E return on equity profile of 15.2/15.6/16.3%. We assign a value of Rs 223 per share to the subsidiaries, on SOTP.
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