SBI - Earnings Momentum On Track; Margin Outlook Positive: Motilal Oswal

Motilal Oswal Report

We organised an interactive session with Mr. Dinesh Kumar Khara, Chairman, State Bank of India, to discuss the macro-economic environment, its growth and margin outlook, and the status of its stated objectives. Key insights from the discussion are highlighted below:

• SBI’s robust performance has been aided by strong loan growth, margin expansion, and lower provisions. The improvement in its treasury performance (which supported other income) and controlled opex led to a healthy growth in core pre-provision operating profit.

• A high mix of floating loans, which will benefit from the re-pricing of loans, will continue to aid net interest income and earnings, even as the cost of deposits may see some increase.

• SBI's asset quality performance remains strong, with a continuous improvement in headline asset quality ratios, while the restructured book remains under control at 0.9%.

We expect 32% earnings compound annual growth rate over FY22-24 and a FY24 return on asset/return on equity of 1%/17.3%.

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