State Bank of India's strong FY15 core performance drives 20% net profit growth

But a strong FY16's also expected.

During FY15, the State Bank of India's core performance improved, leading to 20% net profit growth.

According to a research note from Maybank Kim Eng, gross NPLs dropped from 5% to 4.3%. Restructuring was higher.

Nevertheless, impaired loans at 8.5% were the lowest among peers. The report said it expects strong asset quality and loan growth in FY16.

Asset-quality pressure should start to ease from 2HFY16 as economic growth gains momentum.

Here's more from Maybank Kim Eng:

SBIN has been recognising large stress in the last two years; we believe incremental additions to NPLs should drop. FY15 loans grew just 7.5%.

But adjusting for credit substitutes and the sale of loans to ARCs, growth was 10.5% YoY. Management is optimistic on higher growth in FY16.

Fresh proposals in the renewable-energy, defence-manufacturing and infrastructure sectors have increased. Disbursements should begin in 2HFY16, potentially leading to higher growth of 15% in FY16.

FY16F EPS is expected to rise 28% YoY to INR23. An estimated pickup in loan growth to 15% pa and moderation in loan loss provisions by 20bps to 1.4% should underpin this.