Brokerage and research firm Prabhudas Lilladher recently interacted with State Bank of India (SBI) management to understand the credit outlook, changes in credit valuation, asset quality view and OPEX trajectory. The bank is optimistic about credit growth, as improving economic activity and tight liquidity could support its lending, it said in a note.
“New Offers and Missing Limits within Corporate Aggregate” 6 trillion, while the retail momentum may continue. With cash flow normalizing for SMEs, ECLGS/OTR pools are also performing well. Involvement of non-sales personnel in credit appraisal and strong credit research in 36 areas has strengthened underwriting,” the note said.
SBI’s asset quality may remain under control and the target is to keep the credit cost under 1% and while the brokerage house has changed its estimates slightly, it will expect a core PAT (profit after tax) of 20% from FY22 onwards. Expects CAGR (Compound Annual Growth Rate). -25E. It has maintained its buy rating SBI shares and raised its target value from 650 620. PSU Bank stock is currently hovering around its all-time high at 578 BSE,
With economic activity improving, domestic credit demand has remained strong despite the banking system generally seeing a decline in the first quarter. Prabhus Lilladher said credit growth is expected to continue on strong fundamentals, though there could be minor disruptions due to global macros.
“Another lever to sustain credit growth, system liquidity has been tightened which will urge corporates to turn to banks to meet their credit requirements. SBI is ready to participate in this opportunity as Underwriting and monitoring processes have been strengthened to make the balance sheet more flexible. Overall growth is expected to be 15% in FY13, which is in line with the industry,” it added.
“The capex pipeline is expected to be sidelined by H2FY22. The goal will be to maintain market share, although pricing will not be compromised. The improvement in yield will be visible from Q3 onwards. There is increasing competition among corporates vying for market share with some PSU banks; However, SBI is participating selectively without compromising on pricing,” the brokerage said.
The views and recommendations given above are those of individual analysts or broking companies and not of Mint.
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