Broker's Call: SBI (Buy)

 

 

CMP: ₹288.5

Target: ₹370

State Bank of India reported a weak quarter with net slippages spiking up to ₹26,780 crore (adversely impacted by divergence). Provisioning increased to ₹18,880 crore, resulting in a loss of ₹2,420 crore. On the positive side, 89 per cent of corporate slippages came from stressed assets, resulting in a decline in net stressed assets to 8.4 per cent of total loans. Core PPoP (pre-provision operating profit) held stable led by modest growth in core other income while NII (net interest income) growth stood flat on sequential basis. While the core portfolio performance remains healthy, clean up of residual stressed assets will remain an overhang in near term.

We cut our FY18E/19E/20E earnings by 75 per cent/20 per cent/22 per cent respectively and build in capital infusion of ₹8,800 crore as announced by the government. We revise our PT to ₹375 (1.4x FY20E ABV for bank) and maintain our ‘buy’ rating.

Motilal Oswal

Published on February 12, 2018
TOPICS
stocks and shares
State Bank of India

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