scorecardresearchSBI stock jumps 5% to hit 52-week high; brokerages cheer lender's Q2 scorecard

SBI stock jumps 5% to hit 52-week high; brokerages cheer lender's Q2 scorecard

Updated: 07 Nov 2022, 04:34 PM IST
TL;DR.

SBI's NII for Q2FY23 increased by 12.83% YoY while the net interest margin (NIM) for Q2FY23 increased by 5 bps YoY to 3.55%.

FILE PHOTO: A man checks his mobile phones in front of State Bank of India (SBI) branch in Kolkata, India, February 9, 2018. REUTERS/Rupak De Chowdhuri/File Photo

FILE PHOTO: A man checks his mobile phones in front of State Bank of India (SBI) branch in Kolkata, India, February 9, 2018. REUTERS/Rupak De Chowdhuri/File Photo

Shares of State Bank of India (SBI) jumped almost 5% in morning trade on BSE to hit its 52-week high of 622.90 on November 7 boosted by its September quarter numbers. The stock ended 3.44% higher at 614.20.

The lender on November 5 said it witnessed the highest ever quarterly net profit at 13,265 crore, up 73.93% year-on-year (YoY) for Q2FY23.

Net interest income (NII) for Q2FY23 increased by 12.83% YoY while the net interest margin (NIM) for Q2FY23 increased by 5 bps YoY to 3.55%.

Brokerages cheered SBI's quarterly numbers and believed the stock is poised for more upsides in the medium term.

Motilal Oswal Financial Services said SBI remains one of its preferred picks in the financial sector.

The brokerage firm has a buy call on the stock with a target price of 700. It pointed out that SBI delivered a robust quarter led by margin expansion and lower provisions.

"High mix of floating loans, which will benefit from loan re-pricing, will continue to support the NII and overall earnings even as deposit cost could see some increase. Asset quality performance was strong with continuous improvements in slippages and headline asset quality ratios with a restructured book being under control at 0.9%," said the brokerage firm.

"We raise FY23E and FY24E earnings per share (EPS) by 14% and 6%, respectively, to factor in higher NII and lower provisions even as we model higher employee expenses due to wage revisions. We estimate earnings to post 32% CAGR over FY22-24 and project SBI to deliver an FY24 RoA (return on assets) and RoE (return on equity) of 1% and 17.3%, respectively. We revise our target price to 700 (based on 1.4 times FY24E ABV + 192 from subsidiaries)," said Motilal Oswal.

Emkay Global Financial Services has a buy call on the stock and raised the target price to 715 from 640.

The brokerage firm raised the earnings for FY23-25E by 10-14% factoring-in better growth, margins and lower LLP, and expect the bank to report decadal-high RoE of 15-18% without equity dilution.

Brokerage firm LKP Securities also has a buy call on the stock with a target price of 718.

"We expect the SBI to post a ROA/ROE of 0.9%/15% by FY24E led by healthy balance sheet growth along with higher PCR and stable asset quality. We recommend a buy with a target price of 718 (potential upside of 21%). We value the standalone bank with PBV of 1.5 times FY24E adjusted BVPS of 379 and value of subsidiaries per share of 149," said LKP Securities.

Among the global brokerage firms, Nomura upgraded the stock to a buy with a target price of 690, reported CNBC-TV18.

"The bank's RoA and RoE should hover around 0.9% and 15% over FY23-25 respectively," CNBC-TV18 quoted Nomura saying so.

Morgan Stanley also upgraded the stock to an 'overweight' and raised the target price to 715 from 675, reported CNBC-TV18.

Morgan Stanley said SBI's Q2 numbers were substantial all round and it expects a further margin improvement.

According to a MintGenie poll, an average of 39 analysts have a ‘strong buy’ call on the stock.

Disclaimer: The views and recommendations given in this article are those of broking firms. These do not represent the views of MintGenie.

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First Published: 07 Nov 2022, 11:02 AM IST