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Motilal Oswal Report
India's largest public sector bank State Bank of India reported a mixed quarter, affected by a decline in net interest income and net interest margin contraction due to repo rate transmission, maginal cost of fund based lending rate cuts, and migration of select corporate loans from MCLR linked to T-bill.
However, the bank aims to maintain domestic NIMs above 3% going ahead, supported by ongoing corrective measures and expected improvement in yields. Treasury profits were also weaker during the quarter amid a spike in bond yields.
The bank continues to expect healthy credit growth and has guided for loan growth of 13-15% going forward. Asset quality remained resilient overall, although slippages were slightly higher in Q4, reflecting the seasonality seen in all PSU banks.
Motilal Oswal has trimmed its earnings estimates by 3%/5% for FY27/FY28, and NIM estimates, partly offset by low provisions.
The brokerage estimates FY27 RoA/RoE at 1.0%/ 15.3%. Reiterates Buy with a target price of Rs 1,300 (1.4x Sep'27E adjustd book value + Rs 351 for subs).
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