SBI Share Price Today: From GNPA, NPAs, margins, retail growth, home loans, auto loans, Yes Bank to ICICI Bank | Explained

SBI also expects limited stress after Covid-19, given its relatively resilient retail book. Improving prospects of resolutions in some large corporations should further reduce corporate NPAs. SBI now carries strong PCR on NPAs (71%), driven by strong PPoP on healthy margins and value unlocking in subsidiaries and investments. The Covid-19 provisioning buffer stands at Rs71bn, or 0.31% of loans. Based on PSB standards, this looks reasonable and should help limit incremental credit cost - driving RoA/RoRWA to 0.6%/1.1% by FY23E.

After unlocking, SBI retail growth is swiftly moving toward pre-Covid levels. This is driven by home loans in which SBI has a leadership position and auto loans where it has made deep inroads due to competitive rates: Reuters

SBI share price today: In big relief, State Bank of India's GNPA has steadily declined to 5.3% since FY18. This is the lowest among PSBs and even better than that of ICICI Bank. SBI also expects limited stress after Covid-19, given its relatively resilient retail book. Improving prospects of resolutions in some large corporations should further reduce corporate NPAs. SBI now carries strong PCR on NPAs (71%), driven by strong PPoP on healthy margins and value unlocking in subsidiaries and investments. The Covid-19 provisioning buffer stands at Rs71bn, or 0.31% of loans. Based on PSB standards, this looks reasonable and should help limit incremental credit cost - driving RoA/RoRWA to 0.6%/1.1% by FY23E. SBI share price today is ruling at Rs 280.05, up +0.65 or 0.23%.

SBI Well-positioned to ride economic recovery, digital wave and consolidate market share:

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Factoring in better growth outlook, Emkay is raising their F22/23E credit growth estimate by 200 bps to 10%/15%. Management believes that ‘Digital’ is going to be the soul of future banking. It feels that SBI has a strong digital platform across asset/liability verticals to drive growth/fees, contain costs and improve core RoA.

SBI remains largely self-funded, supported by improving core profitability and value unlocking in subsidiaries that are steadily gaining market share in their respective business areas. As per management, the value accretion/unlocking in the subsidiaries should continue. So, SBI will raise external equity capital only if it is available at favourable rates. The forced investment in Yes Bank could also prove to be a blessing in disguise in the long run.

Despite recent run ups, when stripping off subs/investment value, SBI's valuation is undemanding at 0.5x Dec '22E P/ABV. SBI’s long-standing & enviable liability profile, higher retail orientation among PSBs and expected sharp improvement in risk-adjusted returns (RoRWA), given renewed focus on profitability while maintaining market dominance, call for a re-rating. Emkay raised their FY21-23E EPS by 3-15% on better growth/asset quality expectations and Maintain Buy rating with a revised target price of Rs 340 (0.8x Dec’22E core ABV + subs valuation of Rs 149) vs earlier target price of Rs 265.

SBI - Key risks:

Treasury losses stemming from sharp rise in G-Sec yields
Higher NPA formation in the corporate/SME book
Slower growth

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