Buy State Bank of India; target of Rs 1350: Emkay Global Financial

Moneycontrol • 1 day ago

Original source

Key Investment Pillars

  • Strong broad-based growth: SBI reported strong loan growth of 18.2% yoy, driven by healthy growth across MSME, agriculture, and overseas segments.
  • Margin expansion: NIM expansion was driven by lower deposit costs, supported by FCNR(B)-led replacement of high-cost wholesale deposits and improved CASA balance.
  • Asset quality improvement: Gross slippages declined to ~Rs54bn, coupled with higher write-offs leading to 8bps improvement in GNPA ratio to 1.4%.
  • Profitable growth: SBI continues to prioritize profitable growth, consciously forgoing low-yielding corporate and refinancing opportunities to protect margins.

Thesis Validation Checklist

  • Loan growth: Management expects strong 2H credit growth and achievement of its full-year advances growth guidance of 14–15%.
  • NIM expansion: SBI expects to sustain ~16% corporate loan growth in 2HFY27, supported by a healthy corporate pipeline.
  • Asset quality: The bank estimates post-tax ECL impact of ~Rs195bn, and has identified ~Rs100bn of agri loans potentially eligible for restructuring across three drought-affected states.
  • Return on Assets (ROA): We expect ROA/ROE of ~1.1%/~16% over FY27-FY29E. Investors should watch for these signals over the next ~12 months to see if the thesis is playing out.