State Bank of India has a high coverage ratio and the risk of disappointment is low.
Chirag Batavia • 18 August 2021
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State Bank of India (SBIN)

- SBI is our top pick among PSU banks. It is well positioned to emerge from the pandemic stronger.
- Asset Quality held up well in Q1FY22. Fresh impairments in the quarter held up closer to best-in-class banks. The retail book that is tested currently has lower impact of impairment.
- The bank has a high coverage ratio and the risk of disappointment is low. It also has an additional provision buffer of ~1%. Any large slippage can be absorbed with less stress.
- We expect a much better translation of operating profit to net profit led by lower credit costs resulting in strong recovery in RoEs. We expect it to be more aggressive on growth from hereon.
- We value the bank at Rs. 550 - 1.3x (adj) book value and 8x FY23 EPS - for RoEs in the range of ~13-14%.
Note: The above is a brief note on the company, based on the inputs of KIE research report dated 4th August 2021, which is available on their website at:https://www.kotaksecurities.com/ksweb/ResearchCall/Fundamental. Disclaimer:http://bit.ly/2n5AxIE
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Lakshit Financial Authorized Person of Kotak Securities Limited in cash segments of BSE & NSE and NSE F&O segments with NSE. Lakshit Financial registration number: BSE CASH AP0106730124228 | NSE CASH AP029177621 | NSE F&O AP029177621.Registered Office: Lakshit Financial, ASM 7, Ashwin Sector, Mumbai Agra Highway, CIDCO, Nasik 422009, Maharashtra, India. Kotak Securities Limited. Registered Office: 27 BKC, C 27, G Block, Bandra Kurla Complex, Bandra (E), Mumbai 400051. CIN: U99999MH1994PLC134051. SEBI Registration No. INZ000200137 (Member of NSE, BSE, MSE, MCX & NCDEX). Member Id: NSE-08081; BSE-673; MSE-1024; MCX-56285; NCDEX-1262. AMFI ARN 0164, PMS INP000000258 and Research Analyst INH000000586. NSDL/CDSL: IN-DP-NSDL-23-97.
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Home First Finance (HOMEFIRST) Home First remains consistent on operational and financial parameters. Home First (HFFC) reported 24% earnings growth, with 19% net interest income growth in Q2FY25. Gross stage-3 ratio was flat qoq at 1.7%, stage-2 ratio declined 6 bps qoq to 1.1%. While other asset classes have reported mixed trends residential home loans, as an asset class, continues to stand tall. Home First, with 85% home loan exposure, is well-placed on the above. We expect the company to deliver 25% earnings CAGR for FY25-27E. We remain assertive with a BUY rating and FV of Rs1,360 (no change). Note: The above is a brief note on the company, based on the inputs of KIEresearch report dated 25111Oct, 2024, which is available onour website at: https://www.kotaksecurities.com/ksweb/ResearchCall/Fundamenta1. Disclaimer: http://bit.ly/2n5Ax1E https://www.kotaksecurities.oom/ksweb/research/kotak-research-reports/top-weekly-picks
