STATE BANK OF INDIA RATING: BUY Q2 results: Healthy asset quality

Stellar performance was led by strong loan growth at 20% y-o-y

COUNTRY'S LARGEST LENDER State Bank of India reported a~75% y-o-yearnings increase, led by operating profits doubling year on year. Loan growth was solid at 20% y-oy, net interest margin expanded ~30bps q-o-q, negligible slippages, gross non-performing loans (NPL) declined 40bps q-o-q and net NPLs fell 20bps q-o-q. Return on equity (ROE) touched 18%. Valuations are still not expensive, despite this strong outperformance. We maintain a rating of BUY.

SBI reported -75% y-o-y earnings growth, led by operating profits doublingy-o-y. Revenues grew 12% y-o-y with NII growth at 13%y-o-y, whereas non-interest income (NII) grew 8% y-o-y. NIM expanded 30bps q-o-q to 3.3%. Loans grew 20%y-o-y, which is at a decade high. Asset quality metrics showed further improvement, with the gross NPL ratio declining 40bps q-o-q to 3.5% and net NPL ratio declining 20bps qo-q to 0.8%. Provision coverage ratio (PCR) stood at 78%. RoE stood at 18% and RoA at 1% of loans.