SBI's Q1 earnings beat, stable asset quality impresses analysts; brokerages maintain bullish calls

Year-to-date, SBI stock has given returns of around 32 percent, beating benchmark Nifty's return of around 14 percent during this period.

Most brokerages remained bullish on State Bank of India (SBI) following the public sector bank's fiscal first-quarter earnings surpassing estimates. Analysts are positive on SBI due to its strong loan growth, stable asset quality, and effective cost management.

The country's largest lender reported around a 1 percent on-year rise in its net profit to Rs 17,035.16 crore in Q1FY25, whereas its net interest income (NII) during the quarter climbed 5.7 percent YoY to Rs 41,125 crore, beating estimates.

CLSA has an 'outperform' call on SBI, raising the target price to Rs 1,075 per share. The brokerage highlighted that the PSU Bank's Q1 report showed healthy loan growth, although deposit growth lagged.

Net Interest Margin (NIM) remained largely stable, and asset quality was intact. SBI's credit costs increased but were still below run-rate levels, CLSA noted.

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Investec also remained bullish on SBI with a "buy" call and a target price of Rs 880 per share. Despite a miss on NIMs and weak NII growth due to declining, the company managed to control opex, delivering healthy RoAs in a seasonally weak quarter, the brokerage said.

It expects strong credit growth of 15 percent YoY for FY25, with SBI having adequate liquidity buffers.

SBI's gross non-performing assets (NPA) ratio stood at 2.21 percent as of June 30, compared to 2.76 percent in the same quarter a year ago. The net NPA of the bank came in at 0.57 percent, as against 0.71 percent as of June 30, 2023.

In absolute terms, gross NPAs stood at Rs 84,226 crore compared to Rs 91,328 in the year-ago period.

JPMorgan has an 'Overweight' call with a target price of Rs 1,000 per share. Analysts noted that SBI's gross advances grew 15 percent YoY across segments, and opex growth moderated sharply with wage revision provisions behind.

The lender's asset quality was stable, with net slippages at 54 bps and loan-related provisions around 50 bps. Its Q1 return on assets (RoA) stood at 1.1 percent with expectations to maintain above 1 percent given benign credit costs and opex flexibility.

On the flip side, UBS has a "sell" call on SBI with a target price of Rs 725 per share. The international broking firm expects the current RoA of over 1 percent to decelerate as credit costs increase.

"The relatively lower core Pre-provision Operating Profit (PpOP) to assets and low counter-cyclical buffers leave little cushion for current profitability However, management remains confident about the asset quality of the unsecured retail segment," it said.

Also Read | State Bank of India Q1 results: PAT rises 1% to Rs 17,035 crore

Ahead of the results, shares of SBI settled 1.7 percent lower at Rs 847.75 on the National Stock Exchange (NSE). Year-to-date, the stock has given returns of around 32 percent, beating benchmark Nifty's return of around 14 percent during this period.

In the 12 months gone by, SBI stock has surged nearly 48 percent.

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