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Dolat Capital Report
State Bank of India reported lower net interest income growth at 25% YoY, with 30 basis points sequential decline in reported net interest margin to 3.3%. Profit after tax however benefitted from benign credit costs (36 bps) and higher treasury gains.
Loan growth (1% QoQ) was impacted by muted corporate/overseas growth, excluding of which book grew by 2.3% QoQ (inline).
SBI's asset quality metrics were steady with stable gross non-performing asset %, contained slippages at 1%, and restructured book at 0.7%.
We build in overall credit costs of 0.6% over FY24/25E. With deposits largely re-priced and marginal cost of funds based lending rate re-pricing benefit yet to accrue, we maintain net interest margin estimates for now.
We tweak earnings and maintain 'Buy' with target price of Rs 730 (Rs 700 earlier) against return on asset/return on equity of 1%/16% for FY24E, valuing standalone bank at 1.4 times FY25E adjusted book value. Including value of subsidiaries, this implies a P/ABV of 1.8 times. The standalone bank trades at 1.1 times FY25E ABV.
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