SBI, Bank of Baroda gain ahead of Q3 results

SBI and Bank of Baroda were up 2% each on the BSE in noon deal trade

Shares of State Bank of India (SBI) and Bank of Baroda (BOB) gained 2% on BSE in noon deal trade ahead of their October-December (Q3) results today.

The stock of SBI, India’s largest state-owned bank, was trading at Rs 281, close to its 52-week high of Rs 289, touched on November 11, 2016 in intra-day trade. In past one month, it outperformed the market by gaining 13% as compared to 5% rise in the benchmark S&P BSE Sensex.

BOB rallied 2% to Rs 189 on the BSE. The stock hit 52-week high of Rs 192 on Monday, February 6, 2017. In past one month the stock surged 24% from Rs 153.

According to Prabhudas Lilladher, SBI should see relatively better performance with improvement in net interest income (NII) and relatively lower/stable slippages.

“We expect SBI’s profitability to be better among peers despite slower loan growth. PPOP (pre-provisioning operating profit) will be supported by strong treasury gains and improved NII (on lower base from AQR (Asset quality review). Margins will be stable but we expect opex to be slightly higher,” the brokerage firm said in Q3 results preview.

“We expect BOB to continue its recovery in earnings, especially from a lower base in Q3FY16 being the period of AQR. We expect large treasury gains to support earnings, while business growth will impact core income trajectory slightly. Slippages have been coming off to a respectable level and we believe it to be steady at Rs 3,000?Rs 3,500 crore keeping overall asset quality stable”, added report.

Within PSU banks, we prefer State Bank of India (SBI) due to its strong liability franchise, better capital position, limited need for dilution and value in non?core assets, according to Edelweiss Securities.

For BOB, loan de?growth is likely to arrest this quarter (some sequential growth) as bank capitalised on some corporate opportunities. The earnings will be supported by better treasury income, added report.