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Systematix Research Report
In Q2 FY23, State Bank of India posted an impressive performance on core margin and asset quality fronts resulting in 119% QoQ and 74% YoY jump in bottomline.
SBI's reported net interest income/pre-provision operating profit/ net profit were 8.8%/ 5.5%/ 30.5% above our estimates. The two key factors- expansion in margin and lower credit cost led to ~65 basis points rise in pre-tax return on average asset; margin expanded by 32 bps (to 332 bps) and net delinquency rate fell by (down) 46 bps leading to lower credit cost at 29 bps (annualised) from 63 bps in Q1 FY23.
We opine, there's longevity in margin expansion and credit cost phenomenon in H2 FY23 and FY24, these two factors would push the return ratio (return on average equity) to more than 20% mark in FY24.
Any significant change in credit quality trajectory due to global and/ or domestic factors could disrupt credit growth and profitability.
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