On August 6, the lender reported a 6.70 per cent year-on-year YoY fall in net profit on the back of bulky MTM losses in June quarter, but analysts still remain bullish on the State Bank of India SBI. The public sector lender posted a profit of Rs 6,068 crore in Q 1 FY 23 against Rs 6,504 crore in Q 1 FY 22. The bottom line of SBI saw a fall of 33.42 per cent on a quarter-on-quarter basis. In Q1 of FY 23 the net interest income of the lender increased by 12.87 per cent year-on-year to Rs 31,196 crore.
After Q 1 results, financial firms see up to 25 per cent upside in SBI shares. JP Morgan fixed a target price of 650 against the current market price of Rs 530.65 on August 5. JP Morgan said that Q 1's net income was 26 per cent less than estimates due to MTM loss. The target price was raised to 660 from Rs 615 earlier in the day. Macquarie has set a target price of Rs 665, according to CLSA. It said that MTM losses of Rs 6,550 crore were a drag on the bottom line of SBI.
During the quarter, operating profit fell by 32.70 per cent YoY to Rs 12,753 crore. Excluding trading income and MTM, core operating profit increased by 14.39 per cent YoY to Rs 19,302 crore in Q 1 FY 23 from Rs 16,873 crore in Q 1 FY23, SBI said in a release.
The percentage of gross non-performing assets came at 3.91 per cent in the June quarter, against 5.32 per cent in the corresponding quarter a year ago. The percentage of net NPA also increased by 77 basis points to 1 per cent against 1.77 per cent during the same period.
The broker LKP Securities has a target price of Rs 642, which is positive for State Bank of India. The bank expects to have a ROA and ROE of 0.9 per cent and 15 per cent by FY 24E, due to the healthy balance sheet growth along with higher PCR and stable asset quality, according to the brokerage.
Antique Stock Broking said that the bank's asset quality trends and provisioning cover implies that credit cost can continue to be at its cyclical lows for some time FY 23 E at least and aid ROA recovery.
It is well placed to benefit from the economic recovery because of the high liquidity and best-in-class liability profile. Our earnings have a 2 per cent lower revision than for FY 23 -- FY 24 E. We maintain Buy with an unchanged target price of Rs 620, Antique Stock Broking said.
Motilal Oswal Financial Services said that a higher than expected treasury loss resulted in a marginal cut to our FY 23 earnings estimate. We expect SBIN to report a strong earnings progression right from 2 QFY 23, resulting in a 29 per cent earnings CAGR over FY 22 -- 24.
We estimate an RoA and RoE of 0.9 per cent and 17 per cent in FY 24. Motilal Oswal Financial Services said that SBI remains one of our convictions Buy in the sector.