State Bank of India share price target

In an early move, State bank of India (SBI) has announced benchmarking of its savings deposit above | 1 lakh and short-term loans with repo rate from May 1, 2019 for better transmission of policy rate in line with RBI policy. As per the announcement, saving deposits above | 1 lakh will attract interest of 2.75% below repo rate of 6.25% (i.e. 3.5%) and cash credit above | 1 lakh will be priced at repo rate plus 2.25% (i.e. 8.5%) plus spread as per creditor risk. However, other floating loans will be linked to current MCLR regime that will get indirectly priced as MCLR will be reset with a change in savings rate....

Loan growth in FY19 for SBI is guided to be 14%, in line with industry slated growth at 15%. As bank is still short of priority sector lending target & keeping this in line, management expects to bring in loans from NBFC. Portfolio purchases from NBFCs were at ` 13,000 cr at the end of Dec 2018; and ` 7,000 cr is in pipeline. SBI has strong presence in Govt. and PSU backed NBFCs; and exposure to large reputed private sector institutions. Though, bank is looking for buying...

levels to 56.9% up 295bps QoQ (non-technical PCR). Bank has been on steady path on its guidances but core challenges in medium term are improvement in NIMs beyond 3.5%, fee income sustained revival and loan growth on large balance sheet will keep restriction on ROE improvement which will be seen from credit cost normalization. We retain BUY with revised TP of Rs361 (from...

Recovery playing out as asset quality pressure eases SBI is the largest commercial bank in India with over 1/5th market share of the Indian banking sector. It has a strong domestic presence with more than 22,413...

SBIN earnings have been suppressed over past several years owing to challenges on asset quality, merger issues and adverse rate environment. However with bulk of asset quality cleansing behind and sharp decline in watch-list size to INR203b (~1% of loans) we expect credit cost to decline sharply thus paving way for earnings recovery.

crore in the previous quarter. The net profit for the bank was supported by other income of Rs 473.12 crore from sale of partial investments in SBI General Insurance Company and profit of Rs 1087.43 crore on transfer of the bank merchant acquiring business to wholly owned subsidiary. The bank has improved margins in Q2FY2019, while recorded 12% growth in the net interest income. Bank has improved business growth at 8% along with rise in credit deposit ratio to 73.7% at end September 2018. Bank has also improved the CASA deposits ratio to 45.3% at end September 2018. Bank has posted robust improvement in asset quality on sequential basis as well as over a year earlier level....

Maintain BUY with a SOTP of Rs 352 (1.3xSept-20E ABV of Rs 181 + Rs 112 subs value) Although SBINs 2Q earnings were higher than estimates, they lacked quality. The bank would have reported a loss for the 4th consecutive qtr had it not been for exceptional items of ~Rs 10.87bn and under provisioning (Rs 53bn) for one NCLT case. Consequently, it reported a PAT of ~Rs 9.4bn.

ICICI Securities Ltd | Retail Equity Research Gross slippages came in at | 10888 crore vs. elevated | 14349 crore largely as expected. Corporate slippage was lower at | 3189 crore (| 3704 crore in Q1FY19), of which | 2392 crore was from watchlist. Absolute GNPA declined to | 205864 crore vs. | 212840 crore QoQ,...

Earnings in positive zone (ex of one off) SBI reported positive earnings (ex one off profit on hive off of segment principally led by improved credit costs. In other positives, NIMs marginally expanded and advances grew 11% YoY. The bank is well placed amidst a healthy corporate recovery cycle, increasing pricing power and strong low cost fund base. We are factoring a favorable metrics towards margins and credit costs in H2FY19 with NIM improving ~200 bps to 2.9% and credit costs at 2.9%/2.4% in FY19/20E. The downside risk is its investments in...

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...