Buy, Sell or Hold SBI Post Q3? Here's What Brokerages Suggest and SBI Says
In early trade on February 5, State Bank of India (SBI) shares were locked in a 10 percent upper circuit with stock price touching a 52-week high of Rs 390.60 after December quarters were announced.
SBI Q3 results: Net profit falls 7% to Rs 5,196 crore, net interest income rises 3.75% The country's largest state-owned bank today reported a net profit of Rs 5,196.2 crore for the quarter ended December, down 7 per cent from the year-ago quarter.
Net interest income grew by 3.7 percent year-on-year to Rs 28,819.94 crore in Q3FY21, meeting analysts' estimates. NII in Q3FY20 was inflated by a recovery of the Essar Steel account. Total deposits grew at 13.64 percent YoY, out of which current account deposit grew by 11.33 percent YoY while saving bank deposits rose by 15.99 percent YoY. The net interest margin remained stable at 3.12 percent sequentially but contracted 21 bps year-on-year.
Buy, sell or hold SBI post Q3? Here's what brokerages suggest:
- ICICI direct:
The overall stress is contained at 2.5% of loans as indicated earlier provides comfort reassuring investor confidence in SBI. Covid provisions at Rs 12,976 crore may be raised further in Q4FY21. With retail customers comprising government employees/salaried, the portfolio in this segment appears more resilient in these challenging times. Budget’s growth push provides visibility on Capex and thereby credit growth pickup.
Revise our rating from HOLD to BUY with a revised target price of Rs 410 (earlier Rs 290), valuing the stock at ~1x FY23E ABV for standalone bank and subsidiaries valued at Rs 132 post holding company discount.
- Motilal Oswal
In a challenging environment, SBI reported robust operating performance. Loan growth is showing a healthy recovery while deposit growth stood strong, while margin remains broadly stable.
Asset quality outlook remains encouraging, with controlled slippages, low restructuring levels, and CE at 96.5% (in line with large peers). The bank is well on track to keep credit costs under control, while recoveries from a resolution of large accounts can further support earnings. We maintain our FY22E/FY23E estimates and project RoA/RoE of 0.8%/14.5% by FY23E. Maintain Buy with a target price of Rs 475/share (1.2x Sep’22E ABV+INR155/share for subsidiaries).
Now with the benefit of clean books at FY22E, SBI is gaining market share. Given its stronger deposit franchise, downside support from subsidiaries, and low risk of dilution (as compared to PSU bank peers), we believe that there are several factors to aid re-rating of the stock.
We believe that the bank has less residual stress from the legacy book; and considering the 9M FY2021 performance so far, we believe SBI is likely to undershoot its credit cost guidance for FY2021E. We have revised our estimates and target multiples considering the improved outlook. We maintain a Buy rating on the stock with a revised SOTP-based price target of Rs 460.
- LKP Research
We expect the bank to post a ROA/ROE of 0.5%/9.1% by FY22E led by healthy balance sheet growth along with higher PCR and stable asset quality. We rerated the stock with a strong BUY and increased the target price of Rs 422 (the potential upside of 19%). We value the standalone bank with PBV of 1.2xFY22E Adj. BVPS of Rs 258 and the value of subsidiaries per share of Rs 112.
At 09:20 hrs State Bank of India was quoting at Rs 390.60, up to Rs 35.50, or 10.00 percent on the BSE.
On the contrary, SBI said, “ln this situation, bank is gearing up on all fronts to meet the challenges. The situation continues to be uncertain and the bank is evaluating the situation on an ongoing basis.”
The bank said it has made provisions of Rs 5,265 crore in the reported quarter to account for loans that have not been recognised as bad loans due to the special dispensation of the Supreme Court.
SBI’s slippages, not accounting for the Supreme Court’s dispensation, were on the higher side at Rs 16,461 crore for the nine-month period ended December. The bank said that restructuring request by the end of December quarter were at Rs 18,125 crore
"Excluding the one-off interest income and other income during Q3FY20, the YoY growth in net profit and operating profit for Q3FY21 would be 133.78 percent and 26.23 percent respectively," SBI said.
State Bank of India said it had proactively made an additional provision of Rs 6,247 crore as at December 2020 towards the possible impact of COVID-19 pandemic. "Bank's management is not expecting any significant impact on Bank's liquidity or profitability."