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Motilal Oswal Report
State Bank of India delivered a robust quarter with profit after tax up 74% YoY to Rs 132.6 billion (our estimate: Rs 102.5 billion) fueled by lower provisions. Pre provision operating profit growth was healthy at ~17% YoY with margin expanding ~30 bps QoQ. The bank reported treasury gains of Rs 4.6 billion versus loss of Rs 65.5 billion in Q1 FY23.
Fresh slippages moderated to Rs 24 billion, which coupled with healthy recoveries/upgrades resulted in gross/net non performing asset ratio improving 39 bps/20 bps QoQ to 3.5%/0.8% in Q2 FY23, respectively.
Restructured book too declined to 0.9% during the quarter.
We raise our FY23E/24E earnings per share by 14%/6% to factor in higher net interest income and lower provisions even as we model higher employee expenses due to wage revisions.
We thus forecast SBI to report strong earnings progression at 32% compound annual growth rate over FY22-24. We estimate an return on asset/return on equity of 1.0%/17.3% in FY24.
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