Home / Markets / Stock Markets /  SBI shares: Should you buy the bank stock after record profit in Q3?

India's largest lender State Bank of India's (SBI) quarterly profit surged a better-than-expected 68.5% to a record high of 14,205 crore, boosted by better interest income and a drop in bad loan provisions. The lender reported a healthy performance for Q3 FY23 on the operating front, driven by NIM expansion and higher other income, as per analysts. 

"The management is confident that lower deposit growth is not a concern for them as the credit-to-deposit ratio is still lower. Core operating profit registered a healthy growth. Asset quality continued to show improvement on the back of higher writeoffs. The bank registered RoA/RoE at almost a decade high of 1.1%/18.2%. We maintain BUY on SBI shares with a target price (TP) of 667," said brokerage Nirmal Bang Institutional Equities.

Credit growth at state-owned SBI stood at 17.6% for the reported quarter, with around 18% growth seen in retail and corporate loans each, while deposits grew 9.51%.

"Bank reported beat on all parameters driven by strong NIM expansion, traction in credit growth, better treasury performance (MTM reversal) and superior credit behaviour. The redemption of investment amounting to 3.2 trillion would support loan growth of +17% with deposit growth of ~9-10% in FY23. We believe SBI to benefit from traction in credit growth and improving CD ratio. We maintain our positive stance on the bank given strong business movement and tailwind on NIMs," said PhillipCapital with Buy rating on the bank stock and a target price of 730 per share.

Edelweiss' earnings outlook remains strong, but it does not have enough information on how a large exposure would pan out for the system. The brokerage has maintained ‘BUY’ on SBI (TP: 650) while being watchful of the aforesaid large exposure.

“Our current earnings outlook for SBI remains strong with 1% RoA through our forecast period. Management guided for NIMs sustaining at current high levels. We have built in strong earnings, but watch out for SBI’s exposure to a large group. The bank’s disclosure shows its share of bank loans to this group is high at 33%," the note stated.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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