Fundamental Result Update

SBI Q1FY22 Result Update



State Bank of India (SBI) has reported 55% YoY growth in its net profit at INR 6,504 cr. NII growth for the quarter was low at 3.7% YoY, impacted due to high NII reversal. Operating profit for the quarter was healthy at 15% YoY supported by 48% YoY growth in non interest income and steady NIM  (domestic) at 3.15%, +4bps QoQ. Slippages were higher at INR 15,666 cr, of which majorly was from INR 6,416 cr in SME, INR 2,920 cr in Agri and INR 5,268 cr in retail banking including home loans. However, Management has stated that July month has seen good recovery with recovery of INR 4,790 cr. GNPAs/NNPAs inched up to 5.3%/1.8% (+34bps/+27bps QoQ), with restructuring quantum at 0.8%. Overall, advances growth was at ~6% YoY (~5% YoY in Q4FY21), while deposit growth was strong at 9% YoY.


Valuation & View: Asset quality of SBI has deteriorated due to lower economic activity and covid restrictions which has led to higher slippages. However, Management has stated that July month has seen good recovery and will continue. We cut our estimate by 5%/3% for FY22/23E to factor in increase in NPA. We expect SBI to deliver RoA/RoE of 0.8%/13% by FY23E driven by strong liability franchise, attractive valuation and improving return ratios. We revise our rating on the stock from Buy to Accumulate with a revised target price of INR 533 (INR 486 earlier), valuing it on SOTP basis.

 


Tags: ResultsFundamental


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