Quick Comment

December 24, 2014

Rating matrix
Rating
Target
Target Period
Potential Upside

:
:
:
:

State Bank of India (STABAN)

Buy
| 374
12 months
21%

Stress levels more comfortable than peers

Valuation summary
FY13
14.9
18.1
2.7
3.3
1.0
15.4

P/E
Target P/E
P/ABV
Target P/ABV
RoA
RoE

FY14
21.0
25.6
2.6
3.2
0.6
10.0

FY15E
16.6
20.2
2.4
3.0
0.7
11.1

FY16E
14.4
17.6
2.2
2.7
0.7
11.7
[

Stock data
Market Capitalisation
GNPA (Q2FY15)
NNPA (Q2FY15)
NIM (Q2FY15)
52 week H/L
Equity Capital
Face value
DII Holding (%)
FII Holding (%)

| 229223 Crore
| 60712 Crore
| 32997 Crore
3.1%
327/145
| 747 Crore
| 10
20.1
11.2
[

Price chart
10,000

350
300

8,000

250

6,000

200

4,000

150
100

2,000

50
0
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Jul-13
Oct-13
Dec-13
Mar-14
Jun-14
Sep-14
Dec-14

SBI ( |)

| 307

Nifty (L.H.S)

Research Analyst

State Bank of India (SBI) is the largest bank in India by a wide margin with
credit market share of 16% and balance sheet size of ~| 19 lakh crore.
Even on such a large base, it earns healthy global NIM of ~3.1%, which is
commendable. Its stressed asset proportion is manageable at 6.2%.
Besides, it is well placed on the capital adequacy front. Credit growth has
moderated in H1FY15 at 9% after growing at 17% CAGR in FY09-14. We
expect growth at 15% CAGR for both credit, deposit to | 1604457 crore, |
1860692 crore, respectively. PAT is estimated to grow at 21% CAGR from
| 10891 crore in FY14 to | 15908 crore in FY16E. In near term, with 10
year G-Sec correcting over 50 bps in a quarter, MTM gains on AFS book
may lead to reversal of provisions and add to other income, raising PAT.
Strong on asset quality
The bank has relatively stable asset quality compared to other PSU banks
with stressed asset (NNPA + RA) proportion of 6.2% as on Q2FY15
compared to ~10% for other PSU banks. With two consecutive quarters
of lower o/s GNPA, we factor in GNPA of | 69820 crore (5%) in FY15E and
| 76767 crore (4.7%) in FY16E while NNPA is estimated at | 35877 crore
(2.6%) in FY15E and | 40339 crore (2.5%) in FY16E. FY15 slippages are
expected to stay high but expected to be offset by recoveries/write offs.
Remains most preferred stock in PSU banking space, revising target price
Among PSU banks, we like to stay with the largest bank as it is a proxy to
the economy in the long term. Return ratios may hover around 11.7%
RoE and 0.7% RoA. The management has also indicated plans to unlock
value of subsidiaries by selling stakes that will be positive for the bank
adding to profits and reserves as well as boosting capital. We maintain
our BUY rating and revise the TP upwards to | 374 (| 323 earlier), valuing
the core bank book at 2.4x FY16E ABV (2x earlier) and adding | 45 for
associate banks & subsidiaries (life & general insurance, AMC, etc).
Exhibit 1: Key Financials

FY12

FY13

FY14E

FY15E

FY16E

Net Interest Income (|Bn)

432.9

443.3

492.8

534.8

576.0

Net Profit (|Bn)

117.1

141.1

108.9

138.2

159.1
21.3

Kajal Gandhi
kajal.gandhi@icicisecurities.com

EPS (|)

17.4

20.6

14.6

18.5

Growth (%)

34.0

18.2

-29.3

26.9

15.1

Vasant Lohiya
vasant.lohiya@icicisecurities.com
Sheetal Ashar
sheetal.ashar@icicisecurities.com

P/E (x)

17.5

14.8

20.9

16.5

14.3
137.1

101.5

112.5

116.8

126.3

Price / Book (x)

ABV (|)

2.4

2.1

1.9

1.7

1.6

Price / Adj Book (x)

3.0

2.7

2.6

2.4

2.2

GNPA (%)

4.5

4.8

5.0

5.0

4.7

NNPA (%)

1.8

2.1

2.6

2.6

2.5

RoNA (%)

0.9

1.0

0.6

0.7

0.7

RoE (%)

15.7

15.4

10.0

11.1

11.7

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

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