CMP: INR446 TP: INR600 (+35%) Buy
Motilal Oswal has recommended a buy of SBI.
Digital penetration improving; remains watchful of rising rate environment
State Bank of India (SBIN)’s Annual Report highlightsthe strong progress that the bank is making in fortifying its balance sheet and restoring RoEs back to the longterm average of 15%. The focus remains on building a superior loan book, while maintaining strong underwriting as evident in its lower stressed assets and high PCR.
Corporate segment reported ~5x YoY jump in PBT to INR270b, underscoring the structural improvement in corporate business. The segment thus contributed ~51% of total profits in FY22 v/s 17% in FY21. Retail PBT grew 33% YoY in FY22 v/s 48% YoY decline in FY21, adversely affected by pandemic-induced provisions.
On the digital front, YONO continued to set new records with ~112m downloads and ~48m registered users, along with average daily logins of ~16.6m as of FY22. SBIN sanctioned 1.14m digital loans worth INR211b in FY22 and overall, 36% of its retail asset accounts and 63% of SA accounts were opened through YONO in FY22.
SBIN reported further improvement in asset quality with PCR improving to 75% (85% on the corporate book) in FY22. Controlled restructuring (1.1%), low SMA pool (13bp) and 100% coverage on SR portfolio provide comfort and would drive a sustained reduction in credit cost. We reiterate BUY with a TP of INR600.