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ICICI Securities Report
Despite sharp QoQ rise in opex, State Bank of India once again reported a strong quarter with Q4 FY23 profit after tax at Rs 166.9 billion and annualised return on asset at 1.23%, driven by strong business growth, net interest margin uptick, strong ‘other income’ and contained credit costs.
Both loan and deposit growth was strong (and better than expected) at ~4.6-5.0% QoQ while net slippages turned negative. SBI has delivered 96 bps RoA and 19.4% RoE for FY23.
Despite strong gross advances growth (up 16% YoY), SBI has accreted 33 bps CET-1 capital YoY to 10.27% led by strong profitability, and intends to rely on internal accruals for envisaged credit growth.
SBI has a strong retail franchise (both secured and unsecured loans) and is the key beneficiary of likely revival in corporate capex. It has an edge in cost of deposits which, along with excess statutory liquidity ratio and favorable loan mix, should help sustain healthy NIMs.
With net non-performing assets at 67 bps, miniscule rate sensitive asset book (with ~30% provision coverage ratio) and contained incremental net slippages, we estimate credit costs to remain benign (~50 bps) for FY24E/FY25E.
SBI sounded confident of manageable incremental ECL provisioning. We estimate it to deliver strong RoA and RoE at 0.9% and ~16.5% respectively for FY24E with marginal downtick in NIMs getting broadly offset by better treasury gains.
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