SBI gains 2% to hit a new high ahead of Q2FY23 results

Shares of State Bank of India (SBI) surged 2 per cent to hit a new high of Rs 587.9 per share in Thursday’s intra-day trade, ahead of the July-September quarter results (Q2FY23).

The stock of state-owned lender surpassed its previous high of Rs 586.1, which it had touched on October 25, 2022. In the past one month, it outperformed market as it soared 14 per cent, as against 7 per cent rise in the S&P BSE Sensex.

The board of directors of SBI is scheduled to meet on Saturday, November 5, 2022 to consider the financial results of the bank for the quarter and half year ended 30th September, 2022. So far, the PSU banks which declared their Q2 earnings, have reported strong operational performance with improvement in assets quality.

For overall banking sector, the growth momentum has remained strong over Q2FY23, propelled by a pick-up in the corporate segment (primarily working capital loans), while growth in retail, business banking, and the SME segments continued to remain healthy, said analysts at Motilal Oswal Financial Services (MOFSL).

"Among PSU banks, SBI would be a key beneficiary of the systemic uptick in credit demand. With increasing signs of momentum continuing in corporate demand and a potential capex upturn in FY24, we believe SBI is one of the best-placed participants in the sector," the brokerage firm said.

Meanwhile, analysts at ICICI Securities expect the state lender to post strong profit growth quarter-on-quarter (QoQ) to Rs 9,270 crore. 

"Strong loan growth of around 17-18 per cent year-on-year (YoY) is expected in Q2FY23, which could be one of the highest in last five years and estimated deposit growth at 10 per cent YoY is seen lagging for SBI as well as the system. Overall, NII growth is seen at ~7 per cent YoY due to high base in Q2FY22,” the brokerage firm said.

Analyst also expect the slippages to be around Rs 8,000-9,000 crore, whereas, overall NPA provisions is expected to moderate around Rs 6,600 crore. 

That apart, analysts at Prabhudas Liladher believe that SBI's loan growth is optimistic as economic activity improves and tight liquidity is likely to support its credit offtake. New proposals and unavailed limits within corporate may total to Rs 6 trillion, while retail momentum might continue.

"With cash flows normalizing for SMEs, the ECLGS/OTR pools are also performing well. While underwriting has strengthened with induction of non-sales personnel in credit appraisal with robust credit research across 36 sectors, asset quality may remain under control and target is to keep credit costs below 1 per cent, the brokerage firm said with ‘buy’ rating on the stock and target price of Rs 650 per share.