SBI shares locked at upper circuit, hit 52-week high after SC ruling on electoral bonds; do you own any?

SBI Share Price Today: Shares of State Bank of India (SBI) were locked at three per cent upper circuit to hit a fresh 52-week high mark of ₹763.90 apiece on the BSE after the Supreme Court (SC) ordered the state-owned lender to disclose details of electoral bonds encashed by the political parties, including date and denomination. 

Earlier today, the top court declared the controversial electoral bond scheme as 'unconstitutional' and in violation of the right to information and Article 19(1)(a). The ruling stated that allowing corporates to make unlimited contributions is arbitrary and against the fundamental rights of citizens.

The top court said that SBI would be submitting details of political parties that received contributions through electoral bonds since April 12, 2019, to date to the Election Commission. Further, the court also directed the Election Commission to publish all the details on its official website by March 31, 2024.

Additionally, electoral bonds that remain unredeemed should be returned. The decision is aimed at bringing greater transparency to the electoral process and reducing the influence of corporate contributions on political decisions.

Also Read: Electoral Bond Scheme verdict: SC orders SBI to disclose details of political parties receiving electoral bonds to date

Chief Justice of India (CJI) DY Chandrachud said the electoral bond scheme is violative of freedom of speech and expression under Article 19(1)(a) of the Constitution. The scheme, which was notified by the government on January 2, 2018, was pitched as an alternative to cash donations made to political parties as part of efforts to bring transparency in political funding.  

SBI Share Price Today

On Thursday, shares of India's biggest lender opened at ₹746.70 and gained nearly three per cent to hit a fresh 52-week high mark of ₹763.90 apiece against a previous close of ₹743.35 on the BSE. Shares settled 2.46 per cent higher at ₹761.60 apiece on the BSE. The large-cap PSU stock also emerged as one of the top gainers on S&P BSE Sensex index today.

The stock has soared nearly 17 per cent this month so far, marking its largest monthly gain since January 2022. Since December, it has risen approximately 33 per cent, demonstrating robust growth in less than three months.

Additionally, SBI recently surpassed a market capitalisation of ₹6 lakh crore, becoming the second PSU company, after Life Insurance Corporation (LIC), to achieve this milestone, as its upward trajectory continues.

Also Read: PSU banks continue winning streak for 3rd day in a row; Canara Bank, BoB, SBI reach new record highs

SBI Q3 Results

SBI reported a 35.5 per cent year-on-year (YoY) decline in standalone net profit at ₹9,163 crore for the December quarter, after accounting for a one-time exceptional item of ₹7,100 crore. The net profit was ₹14,205 crore in the year-ago period. 

In the first nine months of FY24, the profit stood at ₹40,378 crore, marking a 20.40 per cent increase compared to the same period in the previous fiscal year, which reported ₹33,538 crore.

SBI's net interest income (NII), the difference between interest earned and interest expended, for the third quarter rose 4.5 per cent on-year to ₹39,815.73 crore, compared to ₹38,068.8 crore in the corresponding quarter of last year. 

The bank's gross non-performing asset (NPA) stood at 2.42 per cent, down from 3.14 per cent recorded in the corresponding quarter last year. On the other hand, the net NPA for the quarter stood at 0.64 per cent compared to 0.77 per cent in the year-ago period.

Motilal Oswal sees potential upside of 15% on SBI

Domestic brokerage firm Motilal Oswal reiterated its 'BUY' rating on the PSU stock with a target price of ₹860 apiece. This target price indicates an upside potential of 15 per cent from the stock's current trading price of ₹749 apiece.

Going forward, the stock is likely to maintain its upward trajectory, according to the brokerage, which estimates a 22 per cent CAGR in earnings over FY24-26 after a blip in 2HFY24, resulting in FY26E RoA and RoE of 1.2 per cent/19.1 per cent

The brokerage highlights SBI's consistently strong performance for the past few years, achieving new profitability milestones such as surpassing ₹500 billion in PAT in FY23.

"Opex has been elevated due to high wage and pension provisions affecting PPoP growth; however, we expect earnings to gain traction from FY25 onwards after this opex blip," said Motilal Oswal. It added that the bank has also made efforts to significantly strengthen its balance sheet and has a healthy provisioning coverage on its corporate book of 92 per cent.

Also Read: SBI stock climbs 33% in less than 3 months, Motilal Oswal sees further 15% upside; here's why

Motilal Oswal expects SBI to achieve 13–14 per cent loan growth over FY23–26E, aided by an improved disbursement rate for sanctioned loans and a recovery in corporate demand. With a strong liability profile boasting one of the lowest domestic CD ratios at 66 per cent, it believes the bank is poised for healthy balance sheet growth.

‘’The asset quality performance remains strong with consistent improvements in headline asset quality ratios, while the restructured and SMA books remain under control at 0.5 per cent and 12 basis points of loans, respectively,'' said Motilal Oswal on SBI.

Following residual wage provisioning, the brokerage projects improved cost ratios in FY25, enhancing profitability and offsetting margin and credit cost normalisation impacts.

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 taking any investment decisions.