Q3FY23 Review: State Bank of India: Robust quarter

6 Feb 2023 , 11:50 AM

SBIN’s standalone reported profit of Rs142.1bn was 5% above estimates, aided by stronger-than-expected margin expansion and lower opex. RoA for the quarter increased to 1.08%, and 0.87% for M9FY23. Healthy loan growth, margin expansion, stronger than-expected treasury income and asset quality improvement were the key positives.

The quarter was characterised by: i) Healthy loan growth (4% QoQ / 19% YoY) and modest deposit growth (1% QoQ / 10% YoY) ii) Improvement in margin (18bps QoQ to 3.5%) iii) Weaker-than-expected fee income (-7% QoQ / 17% YoY) iv) Higher treasury income aided by ~Rs22bn write-back of MTM provisions v) Continued Improvement in asset quality (GNPA ratio lower by 38bps QoQ to 3.1%). Restructured loans declined to 0.85%, from 0.90% in Q2FY23. Credit cost in the quarter was 0.8% (0.4% in Q2FY23). PCR declined slightly to 76%.

Analysts at IIFL Capital Services raise earnings by ~2% for FY23 (flat for FY24/25) and expect SBIN to deliver its target RoA of 1% by FY24 (RoE of ~19%). Given that SBIN has a Tier-1 CAR of 10.8%, it could look to raise capital in FY24 (not factored in the estimates). They leave their growth estimates unchanged at 17% Cagr over FY22-25 (16% over FY23-25). Key drivers for the increase by ~5% in FY23 PPOP are: i) Higher Other income to factor in higher treasury gains ii) Lower opex. Credit cost estimates have been increased by 5-10bps over FY23-25 and now stand at ~60bps over the period.

Analysts of IIFL Capital Services Maintain BUY with Target Price of Rs700/share.