State Bank of India (SBI) share price rose over 4 percent in early trade on May 24 after the company reported a robust set of earnings for the quarter ended March 2021.
The country’s largest lender on May 21 reported a standalone profit of Rs 6,450.7 crore for the quarter ended March 2021 against a profit of Rs 3,580.81 crore in Q4 FY20.
The jump in profit was supported by net interest income and other income, while the low base in the year-ago quarter added to the jump.
Net interest income, the difference between interest earned and interest expended, grew by 18.9 percent year-on-year to Rs 27,067 crore in Q4 FY21. The loan growth stood at 5 percent YoY.
Also Read – SBI Q4 profit jumps to Rs 6,450.7 crore, but misses estimates; dividend announced at Rs 4 /sh
Here is what brokerages have to say about the stock and the company after the March quarter earnings announcement:
Motilal Oswal | Rating: Buy | Target: Rs 530
The bank reported a strong Q4 FY21 in a challenging environment. Deposit growth was strong, led by healthy CASA trends, while loan growth is likely to recover gradually over FY22-23E. Asset quality outlook remains particularly encouraging, with record low slippages and controlled restructuring book.
Dolat Capital | Rating: Buy | Target: Rs 515
We factor in slippages of 1.7-1.8% and expect credit costs to moderate below 1% led by normalization in slippages ratio at lower levels, an already strong PCR at 71%, and continued recoveries. Rolling over to FY23E ABV and adjusting our standalone multiple higher at 1.2x (1.1x earlier), we maintain our buy recommendation with a target price of Rs 515 (Rs 425 earlier) with RoA/RoE of 0.86%/14% for FY23E.
ICICI Direct | Rating: Buy | Target: Rs 500
SBI has surprised positively on the asset quality front while it also has walked the talk and contained stress within guidance. We believe the overall outlook has improved with many positive levers like a decline in credit cost, improvement in credit – deposit ratio, better yields due to fewer reversals and, thus, better margins, in place, which could lift the bank’s operational performance. We expect RoA of 0.6% and RoE of 10% by FY22E with scope to improve gradually.
Sharekhan | Rating: Buy | Target: Rs 520
We find SBI better placed (with respect to asset quality, capitalisation, and underwriting strength, among others) and unique business strengths (being the largest bank in India). We expect NII and profitability to reflate in the next 2-3 years, helped by higher margins. We expect ROEs of 12%-14% by FY2022E/FY2023E, helped by better profitability.
Goldman Sachs | Rating: Buy | Target: Raised to Rs 648 from Rs 585
Broking house increases earnings by 6%/11% for FY22-23. It was positively surprised in FY21 on many fronts.
It was a decade-best asset quality & improvement in RoA on expanding retail portfolio.
Kotak Institutional Equities | Rating: Buy | Target: Raised to Rs 470
The company reported an 80% YoY earnings growth led by an 18% decline in provisions. It is coming out of COVID much stronger than the consensus view and is well placed to improve RoE to normalised levels.
Nomura | Rating: Buy | Target: Rs 550
The asset quality continues to surprise. The growth is the missing piece in trinity with NIM & credit cost. FY22 could still witness RoA of 80 bps & RoE at 14%.
HSBC | Rating: Buy | Target: Rs 485
The asset quality performance was better than peers, while underlying operating trends stable. The valuation discount to private peers unwarranted given its strong performance, and normalisation of credit cost is going to drive rerating.
Jefferies | Rating: Buy | Target: Raised to Rs 520
The slippages at 1% of past year loans were below expectations. The FY21 trend has held up, reflecting derisking of corporate loans & better retail book. The lower credit costs drive upsides to the estimates.
RoE can expand to 12%.
Morgan Stanley | Rating: Overweight | Target: Rs 600
The FY21 asset quality was strong despite COVID. The core PPoP also did well & will improve further. The valuations are attractive at the current levels.
Credit Suisse | Rating: Outperform | Target: Rs 480
It was a strong asset quality outcomes, while recoveries aid RoE. It may not need additional capital unless loan growth picks up. Credit Suisse lift EPS by 2-8% on lower provisions & higher recoveries.
CLSA | Rating: Buy | Target: Raised to Rs 650
The visibility of 15% ROE is high now. The current valuations at 0.7x March 2023 book are undemanding, while FY21 slippages at less than 1.2% of loans were best in class.
Macquarie | Rating: Outperform | Target: Rs 450
The biggest positive has been asset quality; lower slippages & restructuring. However, weak loan growth remains a concern. The Core P/BV was attractive at 0.8x FY23e.
At 09:19 hrs State Bank of India was quoting at Rs 412.60, up Rs 11.50, or 2.87 percent on the BSE.
The share touched a 52-week high of Rs 426.45 and a 52-week low of Rs 149.55 on 18 February, 2021 and 22 May, 2020, respectively.
Currently, it is trading 3.25 percent below its 52-week high and 175.89 percent above its 52-week low.
Disclaimer: The above report is compiled from information available on public platforms. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.