ICICI Direct recommended hold rating on State Bank of India with a target price of Rs 215 in its research report dated June 07, 2020.
ICICI Direct's research report on State Bank of India
SBI reported 21.8% of borrowers, 23% in term loans opted for moratorium. In home loan-20%, MSME 47%, personal unsecured 5% and working capital 20% customers opted for moratorium. Total provisioning for the quarter was at Rs 13495 crore, which includes Covid-19 provisioning of Rs 938 crore only, lower than other large banks. Around Rs 6250 crore worth assets availed standstill benefits and made 15% provisions for the same. Q3FY20 results were highlighted due to Essar Steel income and provision write back. Hence, are not comparable QoQ. PCR (excluding w/off) was at 65.2% vs. 63.5%.
Outlook
Covid-19 provisions and stress of future along with hangover of Yes Bank would keep the stock performance muted. We expect return ratios of RoA at 0.5% and 9.1% RoE by FY22E. We revise target price lower to Rs 215, valuing at 0.7x FY22E ABV standalone bank and assigning subsidiaries value of Rs 80 post holding company discount. We downgrade the rating from BUY to HOLD. MD’s tenure ending by October 2020 will also be an overhang.
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