SBI shares: Strong NII, improving margins drive analysts' optimism after Q2

SBI shares: Jefferies called SBI its "top pick from the sector" and believes that CET-1 CAR at 13 per cent, healthy ROEs & scope to monetise stakes in businesses can support growth.

Healthy net interest income (NII) growth and margins kept analysts bullish on State Bank of India (SBI) following its September quarter (Q2) earnings, even as concerns around treasury volatility and slower loan growth lingered.

 

India's largest lender posted its earnings during market hours on Tuesday and ended the day almost 2 per cent lower. However, in early Wednesday trading today, SBI shares were 1.8 per cent higher at ₹987.75 apiece on the BSE.

 

SBI reported Q2 FY27 profit of ₹23,040 crore, up 14.3 per cent, led by strong NII and a one-off gain from SBI MF divestment of ₹7300 crore. Adjusting for this gain, PAT was ~₹17,000 crore, said Antique Stock Broking, ~15 per cent below its estimates, mainly due to a ₹ 1,300 crore treasury loss and front-loading opex to ensure a more balanced cost trajectory through the year, resulting in steady PPoP performance. READ MORE

 

 

Analysts further noted that despite treasury volatility and slower loan growth vs peers, core trends remain healthy with improving margins and benign asset quality. It added that SBI is also "relatively well positioned" to navigate the ECL transition, given its lower net slippage rates over the past 5–7 years compared with other PSU banks. Also Read | RBI to meet bank CEOs to review preparedness for ECL rollout: C S Setty

 

Global investment bank Jefferies called SBI its "top pick from the sector" and believes that CET-1 CAR at 13 per cent, healthy ROEs & scope to monetise stakes in businesses can support growth.

 

Both NII and margins were ahead of estimates.

 

NII, a key metric, grew 14 per cent YoY to 49140 crore, a 3 per cent beat as per Motilal Oswal Financial Services' (MOFSL) estimates. NIMs expanded by 8 bps sequentially to 2.94 per cent versus estimates of 2.83 per cent. The bank has maintained its domestic NIM guidance of 3 per cent-plus in FY27.

 

Loan book grew 18 per cent year-on-year (YoY), while deposits grew 12 per cent YoY, aided by FCNR(B) deposits of $10.9 billion.

 

Antique, therefore, raised NII estimates by 3 per cent for FY27E/FY28E, on better margins factoring in 50bps of rate hikes, but cut other income estimates on lower treasury gains. "Consequently, we revise our FY27/28/29E earnings by +2 per cent/0 per cent/-5 per cent," the brokerage said, maintaining a 'BUY' rating with a lower target of ₹1,155 (from ₹1,255).

 

Jefferies upgraded FY27-29 estimates by 1-2 per cent to factor in results and rate hikes. "We see 14 per cent CAGR in core profit over FY26-29 with ROA of 1 per cent and ROE of 15 per cent in FY28." It has a target of ₹1,320 on SBI shares.

 

Nuvama Research, meanwhile, trimmed earnings estimates by 2–6 per cent and the target to ₹1,225 (from ₹1,300), valuing the bank at 1.3x Sep-28E ABV (0.9x at CMP), factoring in elevated macro uncertainty and higher risk-free rates, which have driven a broader target reset across its coverage.

 

Disclaimer: Views and outlook in this report belong to the brokerages and analysts cited. They do not reflect the views of Business Standard. Readers are advised to exercise discretion.