Asset quality of the bank continued to see strong improvement as gross non-performing assets ratio came in at 4.5 percent for the December quarter as against 4.9 percent in the previous three-month period.
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State Bank of India (SBI) share price rose in early trade on February 7 after the company reported its December quarter earnings last week.
SBI on February 5 reported a 62 percent year-on-year (YoY) rise in net profit to Rs 8,431.9 crore for the quarter ended December, which was above analysts’ expectations of Rs 7,957.4 crore.
The sharp rise in the bottomline was down to a 32.6 percent on-year decline in provisions to Rs 6,974 crore.
Asset quality continued to see strong improvement as the gross non-performing assets ratio came in at 4.5 percent for the quarter as against 4.9 percent in the previous three-month period.
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Here is what brokerages have to say about the stock and the company after December quarter earnings:
Sharekhan
The bank is well-positioned to take benefits of the economic recovery. We find SBI is better placed with respect to asset quality, capitalisation, and underwriting strengths.
With its business strengths (being India’s largest bank), we expect its NII (net interest income) and profitability to bounce back in the next 2-3 years, helped by higher margins.
We expect the bank to benefit from the recovery in the benign corporate credit cycle.
We maintain buy rating on SBI with an unchanged SOTP-based (sum-of-the-parts) price target of Rs 650.
LKP
We expect SBI to post an ROA/ROE (return on asset/equity) of 0.9%/15% by FY23E led by healthy balance sheet growth along with higher PCR (provisioning coverage ratio) and stable asset quality.
We recommend buying with a target price of Rs 657 (potential upside of 24%). We value the standalone bank at PBV (price to book value) of 1.5xFY23E adj. BVPS (book value per share) of Rs 339 and value of subsidiaries per share of Rs 149.
Motilal Oswal
SBI has delivered a robust 3QFY22 even as it bravely fought off the COVID-19 impact. Its asset quality performance has been nothing less than incredible, easily beating the best of its peers.
The bank has been reporting continued traction in earnings every successive quarter, aided by controlled provisions. SBI has reported a strong acceleration in loan growth and guided at a continued momentum as utilisation levels improve, while retail growth is likely to remain steady.
Its asset quality outlook remains strong as the restructured book remains in control at 1.2%, while the SMA (special mention account) pool has declined further to 16 basis points of loans.
SBI remains our conviction buy in the sector. We revise our target price to Rs 725/share (1.4x FY24E ABV (adjusted book value) plus Rs 225 from subsidiaries).
Prabhudas Lilladher
SBI reported better earnings on combination of better other income and lower opex.
Slippages of Rs 2,500 crore (0.4% of loans) have been coming off with expectations of similar run rate to continue, while recovery trend remains strong.
The bank, despite slightly slower operating performance, is currently clocking 14% ROEs/0.7% ROAs and with credit cost expected to undershoot, rebound in credit growth and gradual improvement in operating performance and ROEs/ROAs remains on track for 15/0.9%.
We retain buy with revised target price of Rs 610 (from Rs 540) based on 1.2x Sep-23 core ABV and Rs 221 (from Rs 218) for subsidiaries.
Credit Suisse
Broking house has maintained an overweight call on the stock and raised the target price to Rs 640
Growth pick-up to aid steady re-rating. CET1 including 9 months profits will be at 10.32%.
The broking house raised FY22/23/24 EPS by 2/3/3%, respectively.
JPMorgan
The research firm has kept an overweight rating with a target at Rs 650.
Activity normalisation likely to see limited additional stress development and credit costs are likely to remain contained.
The growth has picked up while capital and liquidity both remain strong and expect bank to return to normalised RoE of 15% in FY23.
The valuations are attractive at current levels, said JPMorgan.
Kotak Institutional Equities
The brokerage house has kept a buy call and raised the target to Rs 700.
60% YoY earnings growth led by 33% YoY decline in provisions, and asset quality trends are showing improvement.
RoE exceeds 12% despite higher provisions and valuations remain undemanding.
CLSA
CLSA has maintained a buy rating with a target price at Rs 750 as the bank’s strong performance continues.
It delivered a 14% RoE in spite of Rs 4,000 crore in non-NPA provisions & coverage increase.
One of other positives was that opex was flat QoQ.
CLSA increased estimates by 2-4% for FY23- 24CL.
Jefferies
The research firm has kept a buy call and raised the target price to Rs 650.
The key positive was low net-slippages and better loan growth. Its high CASA base and corporate book should aid topline growth.
At 09:17 hrs State Bank of India was quoting at Rs 533.55, up Rs 3.35 or 0.63 percent on the BSE.
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