SBI delivers steady Q2 earnings, misses estimates. Should you buy the stock?

A clutch of top brokerages retained their buy view on PSU stock State Bank of India (SBI) after the bank reported steady September quarter earnings on Saturday, though they were slightly lower than the Street estimates. Net Interest Margins (NIMs) moderation surprised CLSA though the bank’s improving asset quality went in its favour. Kotak Institutional Equities, Motilal Oswal, and Nuvama also expressed their confidence in the stock.

However, the Street appeared unimpressed over the developments as the stock fell to the day’s low of Rs 575.50, declining 0.45% in the early trade. The PSU Bank index was also trading 0.68% lower despite overall positive sentiments in the market.

State Bank of India on Saturday reported an 8% year-on-year (YoY) growth in net profit for the quarter that ended September 2023 to Rs 14,330 crore but was lower than an ETNow poll of Rs 14,500 crore. Net interest income (NII), the difference between interest earned and interest expended, rose over 12% on year to Rs 39,500 crore and was above the estimated Rs 38,500 crore.

Here is what top brokerages recommended:

CLSA: Buy | Target: Rs 700
CLSA has a buy view on SBI shares and puts the price target at Rs 700. Most parameters are on track with NIM moderation a slight surprise, CLSA said, adding that it was a tad soft. Retail loan growth moderates off a high base while CASA remains challenging. The asset quality continues to improve.

Kotak Equities: Buy | Target: Rs 725
Kotak has reiterated a buy stance on the stock and sees an unchanged fair value of Rs 725 valuing the bank at 1.3X (adjusted) book and 8X FY2025E EPS for RoEs of 15%. The brokerage relies on its “solid balance sheet” and fewer pressure points. The stock remains among its top picks.”We have maintained our estimates but believe that there is still scope for upgrades, especially on credit costs. Forecasting credit costs would be challenging but we are still in a period of low credit costs. The nature of the loan portfolio suggests that the intensity of this credit cost is unlikely to be as challenging as it was during the corporate cycle,” it said in a note as it expects the stock to trade at higher levels with the quality of earnings that continue to surprise positively.

Motilal Oswal: Buy | Target: Rs 700
Motilal estimates FY25E RoA/RoE of 1.1%/18.3% as it reiterated a buy rating with an unchanged target price of Rs 700. SBI reported a steady quarter as net profit beat its estimate, aided by lower provisions even as banks made higher provisioning towards wage revisions.

“We broadly maintain our estimates as higher wage provisioning gets offset by controlled credit costs,” Motilal said in its post-earnings stock review.

Nuvama: Buy | Target: Rs 140
Nuvama retains a buy for a target price of Rs 705 based on 1.2x BV FY25E. “With NIM near-bottom and RoA at 1%, risk-reward is attractive,” it said. SBI announced a healthy performance with in-line PAT. NIM declined 4bp QoQ while loan growth was better-than-expected at 3% QoQ/12% YoY leading to NII growth of 1.5% QoQ, marginally above our estimate.

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(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)

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