Expect 9-10% credit growth by end of FY22 – State Bank of India

Expect 9-10% credit growth by end of FY22 – State Bank of India

Update on the Indian Equity Market:

On Tuesday, NIFTY closed at 18,044 (+0.1%). AUTO (+1%), OIL and GAS (+0.8%), and PSU BANK (+0.8%) led the sectorial gainers. FINANCIAL SERVICES (-0.7%), FINANCIAL SERVICES 25/50 (-0.6%), and FMCG (-0.3%) were sectoral losers. The top gainers in NIFTY50 were M&M (+5.2%), TATAMOTORS (+2.0%), and HEROMOTOCO (+1.0%). The top losers were BRITANNIA (-3%), HDFC BANK (-2%), and HDFC (-1%).

Excerpts of an interview with Mr. Dinesh Kumar Khara, Chairman, State Bank of India (SBIN) with CNBC-TV18 on 08th November 2021:

  • In two to three broad components the credit growth is seen. One is retail credit, which has grown more than 15% on a YOY basis. Muted growth was seen in corporate credit.
  • SBIN got unavailed limits, both in working capital as well as undisbursed term loans, and both of them aggregate to about Rs 4,500,000 mn. SBI also got the pipeline for the proposals which are being processed of Rs 1,150,000 mn.
  • SBIN expects as capacity utilisation improves, there will be a good credit growth in corporate sector in near term. The numbers are quite good in the month of October for the corporate credit and the bank expects there should be a decent growth will be seen in corporate credit in 2HFY22.
  • SBIN registered a credit growth of more than 6% on YoY. The company’s Retail and International book both performed well, international book growing more than 16% on YoY. But the corporate side is the only one which was pulling down the growth.
  • SBIN expects credit growth to be in the range of 9% to 10% at the end of FY22.
  • SBIN is processing loans of commodity, infrastructure, and FMCG sectors. The commodity sector is expected to reach its full capacity utilization and they are expanding and also the demand was back on track in FMCG sector. As a result of this, SBIN expects good credit growth from these sectors.
  • On NPAs, SBIN does not see any challenges as far as corporate credit is concerned. As far as retail is concerned the quality of retail is quite good. SBIN expects to operate in a range of 3.1% to 3.25% in Net Interest Margins.
  • SBIN witnessed some challenges in end of 1QFY22, but the collection machinery was improved significantly. They started pre-collection calls which means they informing customers well in advance for their EMI due. The customer centricity helped in reducing stress asserts in the retail sector.
  • SBIN has a restructured book of Rs 3,00,000 mn. History suggests about 30% of restructured book has a probability of becoming NPA. The current restructuring has happened essentially on account of the disruption in cash flow due to Covid-19. SBIN has seen an improvement in cash flows.
  • SBIN made the Covid related provisions of Rs 62,000 mn. They have provided well for the potential risk which might emanate from this.
  • SBIN collaborated with many fintech companies when it comes to offering their digital solutions. The Bank is actively engaged in terms of looking at what value addition fintech bring.

Asset Multiplier Comments

  • SBIN has reported a robust performance and has fought off the COVID-19 impact and displayed resilience in asset quality performance. The bank has been reporting continued traction in earnings, led by controlled provisions.
  • The improved credit growth prospects, stable NIMs and improving asset quality with adequate provisioning coverage will help SBIN to achieve its target of delivering 15% ROE through various cycles.

Consensus Estimate (Source: Market screener and TIKR Websites)


  • The closing price of SBIN was ₹ 529/- as of 09-November-21. It traded at 2x/1.5x/1x the book value per share estimates of ₹ 302/343/388 for FY22E/ FY23E/ FY24E respectively.
  • The consensus target price of ₹ 620/- implies a price/book value multiple of 2x on FY23E BPS of ₹ 343/-

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

Share this post