State Bank of India – Better is the Only Way

Post somewhat disappointing results from India’s Largest Bank, the State Bank of India analysts believe that going forward, the bank has to only get better, though it maybe gradual process.

SBI’s headline profits were 5% below our (and consensus estimates); operationally too, it lacked meaningful direction. While there are signs of improvement – expansion in net interest margins, further improvements in deposit mix and healthy fee income growth. Expect SBI to report steady improvement in NIM over the next few quarters aided by higher CASA and continued deposit repricing.

Delinquencies at 1.8% in 3QFY10 have been declining for past few quarters and are better than our expectations. Margin improvement continued in 3QFY10, as margins improved to 2.8% for the quarter.

Citi expects EPS of 164 fy 10, Rs 208 for fy11 and a 12 month target price of Rs 2,495.

Kotak Research expects an EPS of 155 for fy 10 and Rs 175 for fy11 with a target price of Rs 2,400.

Bofa Merrill expects BI to report an EPS of Rs 162 for fy10 and Rs 196 for FY11 with a target price of Rs 2,595.