State Bank of India (SBI) reported a mixed set of March quarter results but its 'balance sheet was stronger than ever' as one brokerage put it. SBI, another brokerage said, has answers for capital and ECL questions. A third brokerage said March was a historic quarter led by strong return on equity and low non-performing loan (NPL) ratio. The stock stayed flattish on Friday morning at Rs 574.10. Analysts targets on the stock lies in the Rs 700-800 range, suggesting up to 39 per cent upside potential over prevailing price.
Kotak Institutional Equities said SBI reported a healthy 80 per cent YoY earnings growth on the back of 25 per cent YoY growth in operating profits. Return on assets return on asset (RoA) moved to 1.2 per cent and RoE was strong at 20 per cent.
"Loan growth was strong at 16 per cent YoY and NIM flat at 3.4 per cent QoQ. Asset-quality metrics have reached historically low levels. Despite a strong price performance, we do not think that valuations have reached levels that we consider to be expensive," it said while suggesting a target of Rs 725 on the stock.
Among foreign brokerages, Morgan Stanley has a target of Rs 715, JPMorgan has a target of Rs 720 while Bernstein finds the stock worth Rs 700. Among domestic brokerages, ICICI direct finds the stock worth Rs 730. Elara Securities has a target of Rs 730 on the stock; Motilal Oswal Securities and JM Financial pegged the stock at Rs 700 each.
YES Securities said the SBI management assessed that, when ECL is implemented, the impact could be absorbed. It averred that the current capital provides sufficient headroom for normal growth and guided for a loan growth of 12-14 per cent in FY24.
The management stated that the bank does not have to grow deposits at a very fast pace, YES Securities noted while suggesting a revised price target of Rs 795 on the stock.
Prabhudas Lilladher said while SBI saw a mixed quarter, the management sounded confident about maintaining core profitability driven by stronger underwriting, lower net slippages, multi-year low GNPAs and healthy standard asset provision cushion of 80 bps which could more than suffice for ECL impact.
"Although core PPoP for Q4 missed estimates by 8.5 epr cent due to surge in opex, asset quality was better with GNPA at 2.78 per cent (PLe 2.95 per cent) led by lower net slippages. Loan growth guidance for FY24E has been tempered down to 12-14 per cent and retail would drive accretion," it said while increasinf its target for the stock to Rs 770 from Rs 730," it said.
Motilal Oswal said profit for the March quarter was aided by lower provisions in 4QFY23. But there was a miss on pre-provision operating profit (PPoP) due to higher opex. NII growth was healthy as margin expanded 10 bps sequentially during the quarter, it said.
"A higher mix of floating loans (MCLR), which could benefit further from re-pricing, will continue to support NII and overall earnings even as the deposit cost could increase," it said.
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