SBI - Margin Outlook Positive; Aiming For Sustainable RoA Of More Than 1%: Motilal Oswal

Motilal Oswal Report

We organised an interactive session with the management of State Bank of India, to discuss the macro-economic environment, the bank’s growth and margin outlook, and progress on its stated objectives. Key insights from the discussion are highlighted below:

• The global banking system has been facing challenges primarily due to liquidity issues rather than asset quality. The portfolio duration and concentration of loans/deposits under various categories have also caused problems.

• However, the Indian banking system has remained quite resilient thanks to active supervision and higher governance standards set by the Reserve Bank of India. SBI does not see any significant challenges to the Indian banking system.

• The domestic market remains fairly strong, which should support growth. The corporate sector is likely to see a pick-up as the focus on infrastructure will revive owing to the government’s push (70% of fresh capex being led by the private sector).

• SBI has a strong pipeline of sanctions and its undisbursed term loans are coming down (-26% QoQ), which indicate that utilisation is increasing. The manufacturing, export, renewables, batteries and electric vehicle segments are likely to be the key growth drivers.

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