Despite a miss on net interest margins (NIMs) in the June quarter earnings, several brokerages remain optimistic about the prospects of State Bank of India (SBI) and have reiterated their "buy" view on the stock. Here are some key points to note:
Strong Profit Growth: SBI reported a significant jump of 178.24% YoY in its June 2023 quarter profit at Rs 16,884 crore, beating Street expectations. The net profit figure exceeded the estimates from an ET Now poll.
Net Interest Income (NII) Growth: SBI's net interest income (NII) for Q1FY24 rose 24.7% YoY to Rs 38,905 crore. This indicates a healthy growth in the bank's core interest income.
Asset Quality: Brokerage Jefferies noted that asset quality is holding up for the public sector bank (PSU), which is a positive signal for investors. A stable asset quality indicates that the bank is managing its loan portfolio and credit risk well.
Limited Downside and Top Pick: Kotak Institutional Equities sees a limited downside in SBI's stock and has named it as its top pick in the space. This suggests that the brokerage believes the stock has potential for upside gains despite the recent 0.7% decline.
It's important to consider that brokerages' views and stock recommendations are based on their analysis and outlook, which can vary depending on the specific factors they consider. Investors should conduct their own research, understand the investment risks, and align their investment decisions with their individual financial goals and risk tolerance.
Furthermore, the stock market is subject to various macroeconomic and geopolitical factors that can influence stock prices. Investors should exercise caution and seek professional financial advice before making investment decisions.
Here is what brokerages recommended:
Jefferies: Buy | Target: Rs 760
Jefferies has reiterated its buy on SBI shares and put a price target of Rs 760. The June quarter earnings were a tad weaker than Jefferies' estimates with NIMs dragging the topline and operating profits. The loan growth moderated from highs with CASA growth lagging, too. The asset quality is holding up well, the brokerage said.
Kotak Institutional Equities: Buy | Target: Rs 725
Kotak maintains a buy for a future value of Rs 725 which was unchanged. The domestic brokerage is valuing the stock at 1.3X adjusted book and 9X FY2025 EPS for RoEs of 15% though Kotak sees room for an earnings upgrade. The current credit costs cycle suggests that it is likely to be relatively benign for the foreseeable future. As compared with private banks, loans have a higher proportion linked to MCLR and the excess liquidity in the balance sheet suggests that SBI should be able to defend its current NIM.
"We see limited risks to own this bank at these levels. SBI is a top public sector franchise, making it a top pick as well," it said.
Nuvama: Buy | Target: Rs 705
Nuvama has revised its FY24E/FY25E EPS by 8%/5% on higher trading gains while retaining its buy for a price target of Rs 705 at 1.2X BV FY25E. While the state-run bank missed its margin estimates, the return on assets (RoA) of 1.05% was positive, the brokerage said. NIM and loan growth remain key monitorables for Nuvama. It called SBI’s core earnings to be mixed with a significant miss on NII and soft core fees, offset by lower opex and credit costs.