SBI share price rises 2% on strong Q4 earnings; key positives for this PSB stock ahead | Mint
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Business News/ Markets / Stock Markets/  SBI share price rises 2% on strong Q4 earnings; key positives for this PSB stock ahead

SBI share price rises 2% on strong Q4 earnings; key positives for this PSB stock ahead

SBI's share price rallied a little over 2% on Friday after posting yet another strong quarter. Experts are upbeat on SBI's growth in FY24 and has recommended buying in this PSB's stock price.

SBI posted double-digit growth in both PAT and NII during March 2023 quarter. (Pradeep Gaur/Mint.)Premium
SBI posted double-digit growth in both PAT and NII during March 2023 quarter. (Pradeep Gaur/Mint.)

Leading public sector lender, State Bank of India (SBI) posted a stellar buying during Friday's trading session. The PSB's stock gained by at least 2.07% on BSE with an intraday high of 586.05 apiece. Investors are upbeat about SBI after it posted better-than-expected Q4 earnings. Experts are optimistic about the bank and have recommended buying ahead. Among key positive factors for SBI ahead would be its strong retail franchise, improved asset quality, and better treasury gains.

At the time of writing, SBI's share price traded at 574.15 apiece up by 1.6%. The stock opened at 579.10 apiece and rallied up to an intraday high of 586.05 apiece on BSE. The overall upside in the stock is 2.07% as of now in the day.

In the previous session, SBI's share price stood at 574.15 apiece.

During the last quarter of FY23, the PSB recorded an 83% YoY growth to 16,694.5 crore. With that, SBI has extended its record-high PAT. Meanwhile, net interest income (NII) jumped by 29.5% YoY to 40,392 crore. The lender's domestic net interest margin (NIM) for Q4FY23 increased by 44 bps YoY to 3.84%.

Read here: Bata India Q4 results: Share price rallies over 4% in strong Q4 earnings

As of March 31, 2023, gross NPA stood at 2.78% down by 119 bps YoY, while net NPA came in at 0.67% down by 35 bps YoY. Provision Coverage Ratio (PCR) was at 76.39% improving by 135 bps YoY, PCR (including AUCA) improved by 171 bps YoY and stands at 91.91%.

SBI saw yet another strong quarter with Q4 numbers.

As per Rahul Malani, Deputy VP - Research, Sharekhan by BNP Paribas, SBI has reported a solid beat on the earnings front led by lower provisions however on operational front, numbers missed estimates mainly due to higher opex growth despite strong net income growth.

Malani highlighted key positives of Q4. These are --- solid NII growth driven by strong loan growth and Margin improvement, net slippages were negative. However, the key negatives were higher opex growth.

But still, despite a sharp sequential rise in OPEX, in their note dated May 19, ICICI Securities analyst said, "SBI once again reported a strong quarter with Q4FY23 PAT at Rs166.9 billion and annualised RoA at 1.23%, driven by strong business growth, NIM uptick, strong ‘other income’ and contained credit costs. Both loan and deposit growth was strong (and better than expected) at ~4.6-5.0% QoQ while net slippages turned negative. Bank has delivered 96bps RoA and 19.4% RoE for FY23. Despite strong gross advances growth (up 16% YoY), SBI has accreted 33bps CET-1 capital YoY to 10.27% led by strong profitability, and intends to rely on internal accruals for envisaged credit growth."

Read here: Delhivery Q4 results: Share price gains over 2% ahead of Q4 earnings

Going ahead, the brokerage's note said, "SBI has a strong retail franchise (both secured and unsecured loans) and is the key beneficiary of likely revival in corporate capex. It has an edge in cost of deposits which, along with excess SLR and favourable loan mix, should help sustain healthy NIMs."

With net NPAs at 67bps, miniscule RSA book (with ~30% PCR), and contained incremental net slippages, brokerage ICICI Securities expect SBI's credit costs to remain benign (~50bps) for FY24E/FY25E.

Also, the brokerage's note said that SBI sounded confident of manageable incremental ECL provisioning.

Accordingly, ICICI Securities estimate SBI to deliver strong RoA and RoE at 0.9% and ~16.5% respectively for FY24E with a marginal downtick in NIMs getting broadly offset by better treasury gains.

Hence, the brokerage has maintained 'Buy' on SBI but lowered its target price to 730 apiece from earlier 805 apiece, valuing the stock at ~1.3x FY25E ABV and Rs197 per share of subsidiaries.

Furthermore, Gaurav Jani - Research Analyst, Prabhudas Lilladher said, Loan growth guidance for FY24E has been tempered down to 12-14% and retail would drive accretion. However, he does not expect SBI to resort to hiking deposit rates as the bank carries excess SLR of 4 trillion with cushion on LDR (72.3%).

Jani added, "Shifting to Mar’25 core ABV we maintain multiple at 1.6x and raise SOTP based TP at to Rs770 from Rs730. Retain ‘BUY’."


Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.

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Published: 19 May 2023, 09:55 AM IST
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