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ICICI Securities Report
State Bank of India's Q2 FY23 earnings surpassed expectations by a wide margin and beat was across operating metrics crossing 1% return on asset and 17% return on equity mark.
Profit after tax of Rs 132.6 billion, ahead of our estimate (Rs 106 billion) and consensus (~Rs 100 billion) estimates, was supported by:
net interest margins soaring 30 bps QoQ led by repricing benefit and contained deposit cost,
net advances growth of 21% YoY/5% QoQ,
slippages at mere 33 bps, credit cost of less than 50 bps, net non-performing assets now at 0.8% with 78% coverage,
treasury gains of Rs 4.6 billion against a loss of Rs 65 billion QoQ provided further incremental delta.
We expect NIM trajectory to sustain with repricing of lending book offsetting any deposit cost rise. Credit growth of 18% / 16%, stable NIMs, operating profit growth of 22% / 19% and credit cost of 0.8% / 0.9% will drive RoE to 18%/ 17% by FY23E/FY24E, respectively.
This will help SBI command 1.7 times FY24E core banking business book (earlier 1.5 times September-23E).
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