Home / Markets / Stock Markets /  SBI shares surge today on stronger credit growth forecast after earnings beat

Shares of State Bank of India (SBI) surged nearly 6% to 220.95 as the lender on Wednesday reported an upbeat profit and said it expected stronger annual credit growth. The strong earnings from the country's biggest lender also lifted banking stocks, with Nifty Bank index rising 1.6%.

SBI on Wednesday forecast stronger annual credit growth and beat estimates for quarterly profit as economic activity gathers momentum after being hammered by one of the world's strictest lockdowns. The bank now expects credit growth to be between 8%-9% for the year, it said, compared with an earlier forecast of 8%. Retail loans grew 14.55% in the second quarter.

A 49% drop in provisions for bad loans and higher net interest income pushed SBI's net profit up 52% to 4,574 crore in the three months ended September 30, beating analysts' expectations.

Net interest margin rose 12 basis points to 3.34%, while gross bad loan ratio eased to 5.28% from 5.44% in the June quarter after a Supreme Court directive in September that banks should not recognize non-performing assets until further orders.

State Bank of India (SBIN) reported a decent quarter, with healthy NII growth, led by margin expansion, and retail credit growth recovering to pre-COVID levels. On the asset quality front, potential slippages (without the SC order) increased to INR171b, led by the Agri and SME segments. Management indicated total restructuring of INR200b (~0.9% of loans) and a total asset quality impact of INR600b (including restructuring) in FY21E, corresponding to 2.6% of loans. Collection efficiency (CE) recovered sharply to 97%, in line with other large private lenders.

"We believe the earnings normalization cycle for SBI has begun as the uncertainty brought about by the pandemic is receding significantly. We sharply raise our FY21/FY22 estimates by 45%/24%, led by healthy NII and moderation in credit cost," said domestic brokerage Motilal Oswal which has buy rating on the stock with target price of 300.

The NSE Nifty 50 index rose 1.29% to 12,062.4 and the S&P BSE Sensex gained 1.31% to 41,145.67.

Reliance Industries and IT stocks also supported gains in Indian market. The Nifty IT index also rose 1.3%, helped by a 2.3% gain in HCL Technologies and a 1.5% rise in Infosys.

India's most valuable stock, Reliance Industries, was up 2.2%. (With Agency Inputs)

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