Motilal Oswal: State Bank Of India - Asset Quality Holding Steady
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Motilal Oswal Report
State Bank of India is the oldest and the largest bank in India with 21,929 branches spread across the country.
It has a loan book of approximately Rs 23 trillion and deposit base of Rs 34.2 trillion as at Q1 FY21.
SBI indicated that lending is reverting to normal levels and it has witnessed higher growth since June 2020, with rural demand remaining resilient.
The Services sector has been impacted the most due to pandemic while manufacturing has faced disruptions, but is normalizing well. Agriculture, on the other hand, did not witness much disruption.
The bank is strengthening its balance sheet by creating higher provisions toward stressed accounts. It increased its provision coverage ratio (including TWO) to approximately 86% in Q1 FY21 from approximately 65% in Q1 FY18.
It holds higher provision coverage on power non-performing assets (approximately 73% PCR) than peers.
We believe that State Bank of India has prudently improved PCR over the last few years and has one of the lowest stressed assets amongst corporate banks.
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