1 month ago
Shares of State Bank of India Ltd. will be in focus in Monday's trade after the country's largest lender reported mixed results for the September quarter.
Global brokerage firm Jefferies maintained its 'Buy' recommendation on the stock and increased its price target to ₹1,030 from ₹1,000 earlier.
The revised price target implies a potential upside of 22% from Friday's closing levels.
The stock is also among the top picks for Jefferies.
Jefferies wrote in its note that SBI showed stable asset quality in the quarter, with a key focus on an improvement in deposit growth. SBI's profit surged 28% to ₹18,300 crore, exceeding expectations due to higher MTM gains and lower staff expenses.
Key positive was stable asset quality, even in the unsecured loan segment, keeping credit costs at a low 0.4%.
Deposit growth improved to 9%, but it needs to get towards 11-12% to aid targeted loan growth. This may also be headwind for SBI Life, which derives over 50% of its premiums from SBI, the brokerage said.
Jefferies has adjusted its estimates by -2% to +3%, accounting for slightly weaker net interest margins (NIMs), though lower staff costs may provide upside potential.
SBI remains a preferred pick for its robust franchise and higher profitability compared to peers, with CET-1 CAR at 10%, above the 8.6% norm, even excluding profits.
CLSA has an "outperform" rating on SBI with a price target of ₹1,075. The brokerage is expecting Return on Equity (roE) for India's largest lender to be in the 15% to 16% range and added that if loan growth continues to be in the early-teens, the multiples can re-rate from the current level of 1.3 times price-to-book.
JPMorgan too has a "overweight" recommendation on SBI with a price target of ₹1,000.
Jefferies has a "buy" rating on SBI with a price target of ₹1,030. It said that the stable asset quality shown during the quarter was a key positive, even in the unsecured loans segment, which kept credit costs low at 0.4% for the lender.
However, the brokerage said that deposit growth needs to get to 11% to 12% range for the lender to meet its guidance. This, according to Jefferies, can also be a headwind for SBI Life, considering 50% of its premium comes from SBI.
DAM Capital has given a 'Buy' rating on SBI, with a price target of ₹950 per share, citing the lender's steady delivery of numbers with lesser hiccups.
SBI’s earnings exceeded expectations, driven by robust other income from opportunistic treasury and forex gains, along with lower employee costs—primarily due to mark-to-market benefits on pension provisions.
According to the brokerage, the key highlight has been SBI’s ability to grow at 15% across segments but has been a bit at the cost of NIM trade-off.
The management has reiterated its credit growth guidance of 14-16%, while cutting deposit growth guidance to 10-11% for FY25.
Factoring in the healthy growth trajectory, lower staff costs, and contained LLP, Emkay has upgraded FY25-27E earnings 2-7% and expects the bank to deliver 1-1.1% return on asset and 17-19% return on equity.
Emkay has retained a 'Buy' recommendation, with a price target of ₹1,025 per share.
For the September quarter, SBI's net interest income rose by 5% on-year to ₹41,620 crore, while net profit rose by 28% from the year-ago quarter to ₹18,331.4 crore.
On a sequential basis, asset quality for SBI improved. Gross NPA for the quarter stood at 2.13% from 2.21% in June, while Net NPA stood at 0.53%, compared to 0.57% in the previous quarters.
On an absolute basis, Gross NPA stood at ₹83,369 crore from ₹84,226 crore in June, while Net NPA improved to ₹20,294 crore, from ₹21,555 crore during the June quarter.
Out of the 49 analysts that have coverage on SBI, 38 of them have a "buy" rating, six say "hold", while five of them have a "sell" recommendation.
Shares of SBI are currently trading 0.75% higher at ₹849.5 on Monday. The stock has gained over 33% so far in 2024.
