SBI surges 9% on stable asset quality

State Bank of India (SBI) has moved higher by 9% to Rs 248 on the BSE after the bank reported stability in its asset quality for the quarter ended June 30, 2016 (Q1FY17). 

The gross non-performing assets (NPA) stood at 6.94% in June quarter, in line with analyst estimate, against 6.5% in March quarter. Net NPA was at 4.05% against 3.81% in previous quarter. The gross NPA and net NPA stood at 4.29% and 2.24%, respectively, in the year ago quarter.

"SBI’s 1QFY17 asset quality has surprised on the positive side. Lower than expected slippages have helped in reporting better than expected bottom-line. Slippages of Rs 8,790 crore during the quarters was lower than our and street’s expectations and this indicates a large part of the troubled loans has been accounted as NPAs," said Siddharth Purohit, senior equity research analyst for banking sector at Angel Broking in a note.

"While one cannot generalize that the overall PSU banks will start seeing revival, it is fair to assume with the current set of results that SBI’s management has been able to sail through tough times and asset quality could see improvement from here on. With improvement in visibility of earnings we feel the stock could see further upside in the near to medium term. Backed by positive developments on asset quality we upgrade the rating on the stock to ACCUMULATE,” he adds.

SBI reported a standalone net profit of Rs 2,521 crore for Q1FY17, against Rs 1,264 crore in previous quarter. It had profit of Rs 3,692 crore in the year ago quarter.

Analyst at Motilal Oswal Securities expected, SBI to report a net profit of Rs 2,019 crore and gross NPA at 6.9% for the quarter.

Net interest income (interest earned minus interest expended) during the quarter was at Rs 14,313 crore, up 4% against Rs 13,732 crore in the same quarter year ago. NII stood at Rs 15,291 crore in March quarter.

The stock is currently trading at its highest level since December 2, 2015.The trading volumes on the counter jumped more than doubled with a combined 53.22 million shares changed hands on the BSE and NSE till 12:57 pm.