SBI's asset quality improved on the back of moderation in fresh slippages and resolution of two NCLT cases (Bhushan Steel and Electrosteel Steels). While slippages moderated to 3.0% as compared to 7.0% QoQ and 6.5% YoY, recoveries jumped 3x QoQ. Consequently, Gross nonperforming asset (NPA) ratio dipped by 22 bps QoQ to 10.7%. Net NPA ratio declined at a faster pace of 44 bps QoQ to 5.3% as the bank improved its provision coverage ratio (PCR) by 308 bps QoQ to 69.3%. SBI disclosed a watch-list of Rs24,600cr which will be a potential source of incremental slippages from the corporate book. We project slippages of 3.0% in FY19E and expect it to decline to 2.0% by FY20E. As a result, Gross/Net NPA ratios will moderate to 8.0%/4.1% by FY20E. Further, SBI holds provision buffer of 71% on total outstanding of Rs63,000cr in NCLT...