Brokerages remain upbeat on SBI despite lackluster Q3 earnings. Here’s why

Shares of State Bank of India (SBI) fell nearly 2% to hit the day’s low of Rs 638.50 on the NSE on Monday after state lender’s high wage cost dented its earnings outcome. Yet top brokerages remain upbeat about the prospects of SBI shares on strong loan growth and its comfortable position in terms of deposits versus its peers.

Among foreign brokerages, Jefferies and Nomura have reiterated their buy stance on SBI stock while in the domestic pack, Kotak Institutional Equities and Nuvama retained their buy views.

Leading public sector lender State Bank of India (SBI) reported a standalone net profit of Rs 9,164 crore which was down by over 35% from 14,205.34 crore reported by the state lender in the year-ago period.

Read more: SBI Q3 results: PAT down 35% at Rs 9,164 crore on one time exceptional item

Here’s what these brokerages recommended:

Jefferies: Buy | Target: Rs 810

Jefferies maintained a buy view on SBI shares for a price target of Rs 810. In its view, the bank was balancing NIMs to deliver NII growth. On Q3 earnings it is said that the one-off staff costs dragged the pre-provisioning operating profit (PPOP). Uptick in loan growth was led by corporate loans and unsecured retail has been normalising down, it said in a note. Though the asset quality is normalising, it is still trending below Jefferies’ estimates.

Nomura: Buy | Target: Rs 755

Nomura maintained a ‘Buy’ rating and hiked the target price to Rs 755 from Rs 665. The bank posted strong loan growth delivery, though NIM was softer than expectations, it said in its stock review note. The opex was controlled excluding the impact of elevated wage revision provisions. In its view, SBI is well-placed given the tight liquidity ratio.

Kotak Equities: Buy | Target: Rs 760

Kotak maintained its buy rating on SBI counter for an unchanged price target of Rs 760. Brokerage has flagged staff cost to be outweighing every other positive outcome. The quarter had fewer pressure points on slippages, credit costs and asset quality metrics. Loan growth remains healthy at 15% YoY and the bank is comfortable on the deposit situation unlike most private banks, it said.

Nuvama: Buy | Target: Rs 745

Nuvama finds SBI’s Q3FY24 mixed with a miss of 32% on PAT. Strong loan growth and a low LDR were positives, but a high wage provision, lower NII and soft fees were the negatives, it said in a note. “We are cutting earnings sharply by 21%/9% for FY24E/25E to account for higher provisions,” it said as it rolled over the base arriving at a new target price of Rs 745 from Rs 705.

The domestic brokerage retains ‘Buy’ given SBI’s discount to PNB and the stock’s underperformance.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)

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