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The stock price of India’s largest creditor, the State Bank of India (SBI), has risen by more than 100% in a year, but this year (year-to-date) has skyrocketed by more than 48%. Securities firm Motilal Oswal sees SBI shares as rising further as SBI sees it in a good position to report a significant rise in earnings, driven by easing credit costs from 2010. I am.
“SBI shows a significant improvement in asset quality, with total bad assets (GNPA) down 43% over the last three years, while PCR (provisioning coverage rate) is now 68% from 40% four years ago. The slippage in 2009 dropped sharply to 1.2%, which was low compared to many private companies. “
With the outbreak of COVID-19, the recovery trend is expected to continue as the IBC process is accelerating after a long pause (SBI expects to recover more than Rs 100 billion in 2010). Few other high-value accounts under resolution, such as DHFL, support the recovery of asset quality and earnings, he said. Motilal Oswal has a target price ￡600 per share (up to 50% up).
According to the brokerage firm, SBI has historically provided over 15% RoE for the decade before the worst stages of the corporate cycle hit profits, with banks losing consecutively in 2017/2018. I reported. FY21 / 1Q FY22 performed well in a harsh environment. Deposit growth was strong, driven by the healthy trend of CASA, but lending growth is likely to recover gradually from 2010 to 2011.
“The asset quality outlook is particularly promising. Management has improved PCR to around 68%. Continued recovery will further support earnings momentum,” he added. The expected rise in core performance will also further drive earnings growth.
The above views and recommendations are those of individual analysts or intermediaries, not Mentha.
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