SBI gains on almost three-fold jump in Q1 net profit

The State Bank of India (SBI) stock gained nearly a percent in the early trade on August 7 after the country’s largest lender reported a near three-fold jump in net profit in the first quarter of the current financial year.

SBI reported a 178 percent rise in net profit at Rs 16,884 crore in the June quarter aided by healthy net interest income and loan growth.

The net interest margin (NIM) came in at 3.33 percent, up from 3.02 percent in the year-ago period. The domestic IM of the lender grew by 24 basis points to 3.47 percent from 3.23 last year.

The asset quality also improved, as the gross non-performing assets (GNPA) ratio declined to 2.76 percent from 3.91 percent in the year-ago period. The net non-performing assets (NNPAs) ratio fell to 0.71 percent compared with 1 percent last year.

Deposits grew by 12 percent year on year to Rs 45.31 lakh crore. The bank showed a credit growth of 13.90 percent.

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The bank was targeting a credit growth of 15 percent in the financial year 2023-24, chairman Dinesh Khara said in a post-earnings call.

Provisions stood at Rs 2,501 crore against Rs 4,392 crore last year. Slippages in the quarter under review were at Rs 7,659 crore, down by 21.37 percent YoY.

Also Read: State Bank of India Q1 Results: Net profit grows 178% to Rs 16,884 crore, asset quality improves

Brokerage Views

Nomura has a “buy” rating on the stock with a target price of Rs 655 a share. “The bank delivered soft top-line performance, with return on asset (RoA) maintained at 1.2 percent,” it said.

Morgan Stanley has given an “equal weight” to the stock. The firm reduced its target price from Rs 715 to Rs 670.

The brokerage said the “asset quality and cap ratios did well, core Pre-Provision Operation Profit (PPoP) was below estimates due to lower net interest margins (NIMs) and higher opex. Funding costs still to catch, we see negative surprise risk to wage hike assumption. RoAs need to moderate from current 1.2 percent levels”.

JPMorgan has “overweight” call with a target price of Rs 720. The brokerage firm said, “The profit after tax (PAT) was 12 percent ahead of estimates driven by lower credit costs. Overall operating profit was in-line with expectations.”

Macquarie has an “outperform” rating with a target price of Rs 720 a share. The quarterly results were robust on account of low credit costs, it said. “The management is confident of portfolio credit quality. Key risks are lower-than-expected loan growth, deterioration in asset quality,” it said.

Also Read: Bank of Baroda Q1 preview: Net profit may rise 86.5% YoY to Rs 4,044.3 crore

HSBC has downgraded SBI to a “hold” rating with a target price of Rs 630 a share. The firm said the “sequential loan growth was muted and domestic NIMs declined. Treasury profits and forex gains propped up earnings per share (EPS). Margin and cost pressure would result in lowering EPS growth going ahead.”

Bernstein has given a “outperform” rating to the bank with a target price of Rs 700. “State Bank of India remained true sector proxy with loans and deposits growing in-line with system growth,” it said.

Goldman Sachs has a “buy” rating to the stock with a target price of Rs 748 a share. The firm said, “The bank has delivered RoA/RoE of 1.2 percent/ 20 percent for second quarter in a row. Decent visibility of delivering 1.1 percent/ 18 percent in FY24 and sustainable 15%+ RoE in few years.”

Citi, too, has a “buy” call but with a target price of Rs 710. “Earnings beat was led by contained credit cost and treasury gains. Revise earnings upwards by 3-4 percent for FY24/25,” it said.

Brokerage firm Choice Equity Broking has assigned an “outperform” rating with a target price of Rs 755, a potential upside of 31.8 percent.

At 9.57 am the stock was trading at Rs 571 on the National Stock Exchange, down 0.4 percent from the previous close.

Stock Performance

The stock has gained 6.15 percent in the past six months, underperforming the benchmark Nifty Bank index, which has given a return of 8.17 percent during the period.

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