State Bank of India - Q2FY21 Result Update - ICICI Direct

SBI reported a healthy operational performance with NII surging 14.6% YoY on the back of sequential improvement in margins. Other income declined by 29% YoY and 10.2% QoQ as a result of higher base due to stake sale. Cost to income ratio for the bank increased by 514 bps QoQ to 55.16% led by one off wage provision of ~Rs. 1600 crore. Provisions for the quarter declined by 19% QoQ and 23% YoY owing to lesser Covid provisions. Excluding provision related to one fraud account, provision came steady. Thus, net profit for Q2FY21 jumped by 51.9% YoY to Rs. 4575 crore boosted by healthy NII and lower provisions.

Valuation & Outlook

Clarification on overall stress at 2.5% of loans and Covid-19 provisions building up, the hangover of uncertainty is abating. Customers (retail loans) being government employees/ salaried, retail portfolio appears more resilient in these challenging times. NII growth and moderating provisions augur well for the bank's earnings. We upgrade our PAT estimates by 24% / 11% for FY21E/ 22E to Rs. 17027/25818 crore. We expect RoA of 0.6% and RoE at 9.9% by FY22E. However, we remain watchful on asset quality over the next two quarters. We maintain HOLD with a revised target price of Rs. 235 (Rs. 215 earlier), valuing the stock at ~0.6x FY22E ABV for standalone bank and maintaining subsidiaries value of Rs. 80 post holding company discount.

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_SBI_Q2FY21.pdf

Shares of STATE BANK OF INDIA was last trading in BSE at Rs.207.05 as compared to the previous close of Rs. 204.75. The total number of shares traded during the day was 5225212 in over 32956 trades.

The stock hit an intraday high of Rs. 209 and intraday low of 198.1. The net turnover during the day was Rs. 1067599464.

Source : Equity Bulls

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