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Motilal Oswal Report
State Bank of India delivered a mixed quarter with net interest income missing estimates, led by margin contraction, while higher treasury income drove earnings beat.
Business growth remains modest in a seasonally weak quarter and the bank expects to gain healthy traction in the coming quarters. A higher mix of floating loans (marginal cost of fund based lending rate), which could benefit further from re-pricing will continue to support the NII and overall earnings even as the deposit cost could increase.
Asset quality was stable, despite higher slippages, due to Q1 being a seasonally weak quarter, while restructured book stood under control at 0.7%.
We estimate SBI to deliver FY25 return on asset/return on equity of 1.0%/ 17.8%.
We reiterate our 'Buy' rating with an unchanged target price of Rs 700 (1.1 times FY25E adjusted book value plus Rs 206 from subsidiaries).
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