ICICI Securities: SBI’s Valuations Tempting; Risks Incrementally Subsiding
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ICICI Securities Report
Valuations at 0.4 times FY20 adjusted book for inarguably the leading and superior franchise, State Bank of India should not be overlooked – especially when some of the associated risks are subsiding.
As anticipated, risks were mounting high on its valuations and it under performed Bank Nifty by 10-20% in past three to six months.
However, at this juncture, some of the concerns are subsiding: 1) industry-wide improvement in collection efficiency will play out for SBI too; 2) recent equity raising in associated banks caps the cost that SBI has to shell out; 3) Notable transition towards superior asset profile with secular progress in retail (home) loans and recalibrated focus on quality corporates.
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