SBI soars 5%, hits new high on strong Q2; brokerages retain 'Buy' on stock

SBI with its humongous size has reported consistently upbeat performance with this quarter seeing above par growth in earnings and return ratios, said analysts.

Shares of State Bank of India (SBI) hit a all-time high of Rs 621.60 on rallying 5 per cent on the BSE in Monday’s intra-day trade after the bank’s net profit soared 73.93 per cent year-on-year (YoY) to Rs 13,265 crore in the July-September quarter (Q2FY23), backed by improvement in interest margins and decline in provisions for bad loans. The country’s largest lender had posted a net profit of Rs 7,627 crore in Q2FY22.

SBI’s net interest income (NII) improved 12.83 per cent YoY to Rs 35,183 crore for Q2FY23, as against Rs 31,184 crore last year. On a sequential basis, it increased 12.78 per cent, from Rs 31,196 crore in Q1FY23. The bank's Net Interest Margin (NIM) in domestic operations improved 3.55 per cent in Q2FY23, against 3.50 per cent a year ago. It improved 5 basis points on a sequential basis, from 3.23 per cent in Q1FY23.

Its asset quality profile improved, with gross non-performing assets (NPAs) declining to 3.52 per cent in Q2FY23, from 4.9 per cent a year ago. GNPAs stood at 3.91 per cent in June 2022 (Q1FY23). The net NPA ratio declined to 0.80 per cent at the end of Q2FY23, from 1.52 per cent a year ago and 1.0 per cent in Q1FY23. READ MORE

Analysts at ICICI Securities retain ‘Buy’ rating on SBI with target price of Rs 700 per share. The brokerage firm believes SBI with its humongous size has reported consistently upbeat performance with this quarter seeing above par growth in earnings and return ratios. The stock, long due for re-rating, should see a strong positive reaction.

Credit growth guidance of around 14-16 per cent to be driven by steady margins, healthy deposit franchise and strong demand pipeline, which will also aid business growth and overall performance. The steady NIMs with adequate provision buffer to aid healthy earning momentum ahead. Thus, improving RoE trajectory to aid improvement in valuations, the brokerage firm said in result update.

Motialal Oswal Financial Services also retained ‘Buy’ rating on SBI with target price of Rs 700 per share. “SBI delivered a robust quarter led by margin expansion and lower provisions. Even treasury performance improved that supported other income. This coupled with strong control on opex enabled a 17 per cent YoY growth in core PPoP,” the brokerage firm said in result update.

The brokerage firm further said the loan growth was strong and the bank expects the momentum to continue. High mix of floating loans, which will benefit from loan re-pricing, will continue to support the NII and overall earnings even as deposit cost could see some increase. Asset quality performance was strong with continuous improvements in slippages and headline asset quality ratios with restructured book being under control at 0.9 per cent, it added.