Home / Markets / Stock Markets /  SBI's Q3 earnings beat street's estimates: What should investors know?

The largest public sector lender, State Bank of India (SBI) reported strong growth in Q3 of FY23 in terms of both profitability and interest income, beating street's estimates. The bank garnered the highest ever quarterly net profit of 14,205 crore up by 68.47% YoY. The lender's net interest income (NII) witnessed robust growth driven by better margins, while asset quality improved. SBI share price will be in focus in the week ahead post Q3.

Q3 PAT jumped by 7.09% from 13,265 crore in the preceding quarter.

In Q3FY23, the bank's NII stood at 30,687 crore, registering a growth of 24.31% YoY and 8.46% QoQ. Net interest margins (NIM) expanded by 29 bps YoY and 14 bps QoQ to 3.69%.

In terms of asset quality, the bank's gross NPA ratio contracted 136 bps YoY to 3.14%, while the net NPA ratio slipped by 57 bps YoY to 0.77%. The provision Coverage Ratio (PCR) at 76.12% improved by 490 bps YoY.

What should investors know?

ICICI Direct in its post-Q3 report said, "SBI has demonstrated its strength in the last few quarters both on core operating performance and asset quality. Its above par growth in earnings supported by strong margins and return ratios reaching >1% in quarter warrant a re-rating, which is long due and should see strong positive momentum."

Thereby, ICICI Direct said, "thus, we maintain our BUY rating on the stock," adding, "we value the bank at ~1.2x FY25E ABV and subsidiaries at 172/share to arrive at a revised target price of 700 from 750 earlier as multiples across banks have moderated."

According to Gaurav Jani – Research Analyst, Prabhudas Lilladher, SBI's Q3FY23 earnings beat led to better NII, while asset quality improved.

Jani added, "NII was strong at Rs381 billion (PLe Rs368 billion) led by better margins. NIM was higher at 3.41% (PLe 3.29%) led by faster yield expansion. Loan growth was in-line at 18.6% YoY (PLe 18.5%) while deposit growth came at 9.5% YoY (PLe 12.3%)."

Further, Jani said, "PAT was a beat at Rs142 billion (PLe 135 billion) led by NII and treasury," adding, "stock trades at ~1.1x Sep’24 Core ABV."

Meanwhile, Manish Chowdhury head of research at Stoxbox said, "State Bank of India reported an all-round stellar performance, beating market estimates and showing a strong position of the public sector bank which got its dues after a long time. The bank delivered a strong performance across its all-key parameters, showcasing that it holds a stronghold in the industry and is truly a market leader.

Further, Chowdhury explained that the bank has ensured that it focuses on increasing profitability through effective cost optimization and maintaining strong asset quality. Through its promptness in identifying the risk of default, the bank has ensured that the provisions are factored in well within time so there is no stress on its asset quality. Although the recent Adani group fiasco cast doubt on the bank’s exposure to its assets, the bank remains confident that neither it will affect the profitability of the bank nor its asset quality.

"With the huge capex announcement on infra and agriculture in the recent budget by the Govt. of India, the bank would be one of the biggest contributors to the nation’s development," Stoxbox expert added.

On Friday, SBI shares closed at 544.45 apiece up by 3.12% on BSE.


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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