SBIN (standalone) reported 80% y-o-y raise in Q4FY21 net revenue, driven by 19% y-o-y development in NII (7% beneath expectations owing to Rs 21 bn of accrued interest create-off and Rs 8.3 bn of interest-on-interest waiver). Asset high-quality shocked positively with aggregate of slippages and restructuring at Rs 464 bn against a guidance of Rs 600 bn. The second wave of COVID-19 might trigger higher distress in the Tier III & beneath geographies and SBI could face fairly larger NPLs vs. the initial wave. But, we really feel SBI might nonetheless undershoot the FY21 credit price. We count on RoA at ~80bp and RoE at ~14% in FY22F.
Asset high-quality: The effect of the second wave of COVID-19 is nonetheless uncertain. While management chose to not provide a guidance on credit fees, we raise the loan credit price by 10bps to 93bps for FY22F but retain it beneath FY21 levels of 116bps. The comfort comes from the surprisingly reduce NPL formation ratio (1.3%), far greater than peer private sector banks in a pandemic year. The reduce slippages are also a function of muted loan development in corporate and SME companies. Support also came by way of Rs 250 bn of emergency credit loans (ECLGS).
Meanwhile, two-thirds of retail is nonetheless secured mortgage and auto loans, exactly where the delinquency levels are generally reduce. The issue could have been the potentially largely unsecured retail book (“Xpress credit”, 22% of retail) exactly where mgmt is deriving comfort that 95% of borrowers are salaried. Total restructuring book is 70bps.
Deposits and NIM: Loans grew 5.3% y-o-y/3.4% q-o-q, in line with the method. Domestic deposits have been up 14% y-o-y/ 4.2% q-o-q, with CASA ratio enhancing 100bps q-o-q to 46%. While SA development is steady (15% y-o-y), CA saw a blip up, expanding at 32% q-o-q. Loan development will probably stay weak in next two quarters. But SBI has managed NIM effectively so far, owing to its access to low-price deposits. Even following NPLs & interest of interest waiver, it saw 7bps larger NIM in FY21 vs. FY20.
Retain Buy: We marginally tweak EPS for FY22-23F and introduce FY24F, forecasting 15% BVPS CAGR. We retain TP at Rs 550, which values the stock at 1.4x P/B FY22F book and 8x P/E FY23F consolidated earnings. The stock is trading at 1.2x P/BV on FY21 book (consolidated). We worth the standalone bank at 1.3x P/B, SBI Life at Rs 1,175/share, Cards at Rs 1,one hundred/ share, and SBI AMC at 8% of AuM.