Dolat Capital recommended accumulate rating on State Bank of India with a target price of Rs 235 in its research report dated June 06, 2020.
Dolat Capital's research report on State Bank of India
Led by lower NII growth and higher provisions, SBI reported lower than estimated PAT of Rs 35.8bn (~Rs 16.7bn ex-SBI Cards stake sale). Higher agri slippages (Rs52bn) during Q4 impacted NII growth as the bank had to make interest reversal for 3 years against this portfolio(~Rs15bn). While the bank made 15% provisions against Rs62bn of loans eligible for asset quality standstill (RBI requirement of 10% over Q4FY20 and Q1FY21), there were no excess COVID-related provision buffers created. SBI has extended moratorium to all borrowers ex-NBFC where it is on a case-by-case basis. Agri loans excluded from moratorium. Borrowers paying less than two EMIs over Mar-May are considered to be under moratorium. About 16-18% of bank’s customers are under moratorium as of May-19.
Outlook
We maintain our BUY rating with a TP of Rs235 based on 0.7x FY22E ABV for standalone bank and the value of its subsidiaries, implying a FY22E P/ABV of 1.3x.
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