Buy State Bank of India; target of Rs 732: HDFC Securities

HDFC Securities' research report on State Bank of India

SBIN posted its highest-ever quarterly profit and a strong beat, led by healthy loan growth (+17% YoY), better fees and lower credit costs, having front-loaded its provisions during 9MFY23 on a prudent basis. Asset quality remains strong, with GNPA at 2.8% (-36bps QoQ) and the restructured pool registering a marginal improvement to 0.8%. Operating expenses flared up QoQ on account of wage revision and franchise-building initiatives, resulting in an elevated C/I ratio at ~55%. While a relatively low LDR (~73%) and high stock of surplus SLR (INR4trn) offers comfort on incremental loan growth, management has guided for modest growth in deposits, backed by excess liquidity on the balance sheet.

Outlook

We tweak our FY24E/FY25E estimates to factor in stronger loan growth and lower credit costs, partly offset by higher opex; maintain BUY with a revised SOTP-based target price of INR732 (core bank at 1.2x Mar-25 ABVPS)

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State Bank of India - 19 -05 - 2023 - hdfc