* In the last two years, State Bank of India (SBIN) has witnessed significant earnings volatility and material change in core earnings parameters. 4QFY12 results, which surprised positively, gave an indication of the bank's sustainable earnings.
* In this note, we (a) assess the significant changes that have happened in the last two years in core operating parameters, and (b) address some of the key market concerns relating to the bank.
* We retain SBIN as our top pick in the sector, on the back of (a) strong improvement in core operating performance, (b) one of the lowest net stress loans (NSLs) amongst PSBs, and (c) one of the highest earnings CAGR of 25%+ over FY12-14. The stock trades at 20%+ discount to LPA. Buy for 31% upside.