SBI emerges as second PSU firm to surpass ₹6 lakh crore market cap; check stock price
State Bank of India (SBI) shares surged 3.80% to reach an all-time high of ₹675 apiece, pushing market capitalisation beyond ₹6 lakh crore. For Q3FY24, the bank reported a drop in the net profit, affected by higher wage provisions and soft other income.
Shares of State Bank of India (SBI), the nation's largest public sector bank, surged 3.80% to reach an all-time high of ₹675 apiece in today's intraday session. This propelled the bank's market capitalisation beyond ₹6 lakh crore, making it the second PSU company, following Life Insurance Corporation, to achieve this milestone.
According to the latest BSE data, eight Indian companies boast mcap exceeding ₹6 lakh crore.
Post the interim Budget 2024-2025, the PSU bank stocks experienced a one-way spike after Finance Minister Nirmala Sitharaman set the gross and net market borrowing for FY25 at ₹14.13 lakh crore and ₹11.75 lakh crore, respectively, surprising analysts, who had anticipated gross market borrowings slightly over ₹15 lakh crore.
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This development resulted in a significant drop in Indian bond yields, which is projected to boost the Treasury portfolio of PSU banks, which hold more government bonds than private sector banks.
Another positive factor contributing to the rally in PSU banks is the anticipation that the Reserve Bank of India (RBI), during its February Monetary Policy Committee (MPC) review meeting, is likely to once again implement a pause on the repo rate.
In addition, the anticipated rise in corporate lending activity following the uptick in capital expenditure in the budget also supports the PSU banking stocks to trade at higher levels.
For the December-ending quarter, SBI reported a drop in its standalone net profit by 35.50% YoY to ₹9,164 crore, affected by higher wage provisions and soft other income.
In 3Q, SBIN made wage-related provisions of ₹6,300 crore (for a 17% wage hike). For 9MFY24, wage-related provisions stood at ₹12,720 crore. For Q4FY24, the bank guides for lower wage provisions at ₹5,400 crore. It also made a provision of ₹240 crore for its AIF exposure.
As a result, PPoP (Pre-Provision Operating Profit) declined by 19% YoY to ₹20,300 crore, while Core PPoP declined 20% YoY. In addition, there was a one-time item of ₹7,100 crore in Q3 due to differential pension at 40% or 50%, while this order was pending from 2002.
Since this event was bound to happen, the bank made ₹5,400 crore and another ₹1,700 crore for the neutralisation of DA relief for pre-November 2002 retirees and family pensioners, according to domestic brokerage firm Motilal Oswal.
Following the Q3 performance, Motilal Oswal increased its FY25 EPS estimates by 4.6%, expecting controlled credit costs post completion of wage and pension provisioning in FY24. It forecasts a 1.1% and 19.6% RoA and RoE in FY25, maintaining a 'buy' rating with an unchanged target of ₹800 apiece.
Similarly, Phillip Capital also retained its 'buy' rating on the stock and lifted its target price higher to ₹720 apiece from an earlier price of ₹660. Systematix also retained its 'buy' recommendation on SBI after the bank's Q3 earnings. The brokerage also raised the target price for the stock to ₹770 apiece from ₹692.
Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before making any investment decisions.
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