Friday, February 23, 2024

SBI: Selling in this banking stock due to decline in profits, but brokerage house gave BUY rating, target more than Rs 800

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SBI Stock Price Today: In today’s business, there is a decline in the shares of SBI, the country’s largest government bank. In today’s trading, the stock weakened by about 2 per cent to Rs 639, whereas it had closed at Rs 649 before the results on Friday. The bank had released its results (SBI Results) for the December quarter on Saturday, which were weaker than expected. However, even after this, most of the brokerage houses still have confidence in this banking share and they are advising to invest in it. The brokerage believes that SBI has a large base and profits will be back on track in the coming days.

Brokerage House Motilal Oswal

Brokerage house Motilal Oswal has given BUY rating on SBI stock and has kept a target price of Rs 800. The brokerage says that the core performance has been on track. However, the bank’s 3QFY24 PAT was weaker than expected. There has been a decline in profit due to higher wage provisions and exceptional items of Rs 7100 crore. NII had 4.6% YoY and 0.8% QoQ growth, which is as per estimates. Net interest margin declined by 7bp QoQ to 3.22%. Slippages increased marginally to Rs 5050 crore, while gross NPA ratio declined by 13bp due to healthy recoveries and further write-offs. RSA pool declined to Rs 189 billion or 0.6% of advances. The brokerage has raised its FY25 EPS estimate by 4.6 per cent as salary/pension provisions are fully met in FY24 and overall credit costs are expected to remain under control. We estimate that FY25 RoA and RoE may be 1.1% and 19.6%.

Brokerage House JM Financial

Brokerage house JM Financial has also given BUY rating on SBI shares and has kept a target price of Rs 800. The brokerage says that loan growth is healthy and it has grown at 15 percent on an annual basis, while on a quarterly basis it has grown at 5.2 percent. However, deposit growth has slowed down and it increased by 1.6% QoQ and 13% YoY to Rs 47.6 lakh crore. Management has maintained the guidance for loan growth at 14-15 percent. Talking about asset quality, it declined by 13 bps on quarterly basis to 2.42 percent. PCR remained strong at 74.2 percent.

The brokerage believes that delivery of growth on the guided line, sustaining NIM near current levels and controlled asset quality should lead to strong profitability going forward. The brokerage has estimated RoA and RoE of 0.94% and 16% for FY26E. Investment has been advised by valuing the core banking business at 1.2x FY26E P/BV.

Global brokerage house Nomura

Global brokerage house Nomura has also given ‘BUY’ rating on SBI and a target price of Rs 755. According to the brokerage, while NIM has remained soft, loan growth has remained strong. Despite high provisions for salary and pension, OPEX has remained under control.

Brokerage House Jefferies

Brokerage house Jefferies has also given ‘BUY’ rating on SBI and has kept a target price of Rs 810. According to the brokerage, loan growth has strengthened by 14 percent on an annual basis. This quarter’s profit has declined due to wage cost but the bank has managed the net interest margin properly. Net interest income was as per estimates. Asset quality is improving.

How were the bank results?

The profit of State Bank of India has declined by 35 percent on annual basis in December quarter to Rs 9164 crore. Profits have declined due to a huge one-time provision of Rs 7,100 crore for salaries and pensions. Total income increased to Rs 1,18,193 crore, which was Rs 98,084 crore in the same quarter of the last financial year. The interest income of the bank increased to Rs 1,06,734 crore, which was Rs 86,616 crore in the same quarter of the last financial year. Talking about NPA, gross NPA was 2.42% vs 2.55% (QoQ). Net NPA has been 0.64% vs 0.64% (QoQ).

(Disclaimer: The advice to invest in stocks has been given by the brokerage house. These are not the personal views of digitnews. There are risks in the market, so take expert opinion before investing.)

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