SBI Q3 Results Review - Steady Quarter Excluding One-Time Pension Provisions: Dolat Capital

Dolat Capital Report

State Bank of India reported in-line net interest income growth at 5% YoY, with net interest margin at 3.2% (-7 basis points QoQ). Despite lower than expected credit costs (8 bps), profit after tax was impacted by one-time pension and dearness expense of Rs 71 billion, an unanticipated line item.

Wage hike related provisions have been front-ended in FY24, and employee expense to decline in FY25.

Asset quality metrics were steady with low slippages at 0.6% and marginal credit costs (reversal of provisions against restructured book). We build in lower credit costs of 22 bps for FY24E (versus 15 bps annualised in 9M) and 55- 60 bps for FY25/26E. Loan growth at 5% QoQ was strong and broad based across segments.

Front-ending of wage hike has led to lower profit after tax for FY25E, but improved earnings profile for FY25-26E. Maintain 'Buy' with target price of Rs 750 (from Rs 730 earlier, led by improved subs valuations) against return on asset/return on equity of 1%/16% for FY25E (standalone bank valued at 1.3 times). Standalone bank trades at 1.1 times Sep-25E adjusted book value.

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