Research: Indiabulls
Rating: Buy
Indiabulls upgrades its Rating on SBI from ‘hold’ to ‘Buy’ because the bank’s aggregate business registered an increase of 25.9% y-o-y , led by increase in advances and deposits. SBI’s net interest margin is high at 3.01%.
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Further, its CASA ratio is 41.05% and is set to rise further as SBI plans to enhance its geographical spread over the next few years. The bank has been displaying a positive trend in non-interest income. From a negative growth rate last year, there has been a 35.2% y-o-y increase in SBI’s other income for the first nine months of FY08.
Huge shareholder value may be unlocked following listing of SBI’s non-banking businesses and merger with associate banks. The merger with State Bank of Saurashtra has already been approved by both entities. This is may pave the way for merger with other associate banks. Subsidiaries are valued at P/B multiples, the new business achieved profit (NBAP) multiple and percentage of AUM, depending on the business.
