scorecardresearchQ3 Earnings Review: SBI posts 62% rise in profit, brokerages see further

Q3 Earnings Review: SBI posts 62% rise in profit, brokerages see further upside

Updated: 07 Feb 2022, 10:01 AM IST
TL;DR.

State Bank of India's (SBI) December quarter profit rose to 8432 crore. Naturally, brokerages are happy and continue to remain bullish on the stock.

On the back of the strong earnings during the December quarter, brokerages remain bullish on the stock.

On the back of the strong earnings during the December quarter, brokerages remain bullish on the stock.

State Bank of India (SBI) reported another strong quarter in December beating analysts' expectations. Its net profit rose 62 percent to 8,431.9 crore in the December quarter (Q3FY22). This was aided by steady Net Interest Income (NII) -- the core metric for a bank -- growth and controlled provisions, as asset quality showed remarkable strength.

Provisions for bad loans declined 32.6 percent year-on year (YoY) to 6,974 crore while the lender's net NII for the quarter rose 6.3 percent (YoY) to 30,687 crore. Meanwhile, the Net Interest Margin (NIM) improved 6 basis points YoY to 3.4 percent.

Asset quality of the mender also saw strong improvement with gross non-performing assets (NPA) at 4.5 percent in Q3 versus 4.9 percent in the previous quarter. The net NPA also rose to 1.34 percent versus 1.52 percent in the previous quarter.

On the back of the strong earnings during the December quarter, brokerages remain bullish on the stock.

Brokerage House Motilal Oswal maintains a 'buy' call on the stock with a target at 725, indicating an upside of 37 percent.

As per the brokerage, the lender has delivered a robust Q3 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.

It added that SBI remains one of their preferred 'buys' in the banking sector.

It further noted, "SBI has reported a strong acceleration in loan growth and guided at a continued momentum as utilization 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 percent."

The brokerage raised its FY23E/FY24E earnings by 4 percent each and expect an RoA/RoE of 1 percent/17 percent in FY24E.

Another domestic brokerage Nirmal Bang is also highly positive on the stock. In its earnings review note, the brokerage stated, "with the asset quality outlook positive and a healthy provisioning buffer, credit cost is expected to trend lower compared to the recent past, thereby aiding return ratios. The bank has reiterated its 15 percent ROE guidance."

It maintains a 'buy' call on the stock with a target price of 639, indicating a 21 percent upside.

Centrum Broking also reiterated a 'buy' call on the stock with a target at 750, indicating a 42 percent upside in its earning review report.

Article
There are various different types of brokerage accounts each with a separate set of pros and cons one could choose from.


According to Centrum, "SBI saw a strong quarter again with a beat on all fronts. NII was higher led by better loan growth that also drove higher NIM. Led by robust business volumes, fee income was healthy while opex was controlled QoQ."

It further added that with SBI's inherent balance sheet strength, it could see strong loan growth once the capex cycle revives. Centrum also raises loan growth estimates over FY22-24E by 3 percent.

Despite the robust earnings, the stock of the lender was trading flat, up 0.7 percent at 534 per share on the BSE at 9:50 am.

First Published: 07 Feb 2022, 10:01 AM IST