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Prabhudas Lilladher Report
State Bank of India reported a good quarter; while net interest income beat due to better net interest margin and loan growth. Adjusted for one-time impact (Rs 71 billion) of pension liability and benefit of exgratia, core pre-provision operating profit/profit after tax was 4.8%/7.0% ahead of our estimate.
Credit growth at 5.2% QoQ was best-in-class. While bank guided for 14-15% loan growth, we expect SBI to grow at 13% compound annual growth rate over FY24-26E due to tight system liquidity. We have cut loan growth by 1% for all coverage banks except SBI, given upside risks as the following levers may support credit offtake viz.
low loan-to-deposit ratio at 74%,
adequate liquidity coverage ratio at 131% and
sufficient CET-1 at 11% (post RBI norms on re-classification of investments).
Staff cost for FY24E may be Rs 773 billion (+35% YoY) due to wage revision impact of Rs 180 billion. There are downside risks to our staff cost estimate for FY25E at Rs 800 billion (+4% YoY).
We remain positive on SBI and keep our multiple unchanged at 1.4 times on September-25E adjusted book value and maintain SOTP based target price at Rs 770. Retain ‘Buy'.
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