SBI share price muted today after Q2; brokerages maintain target price

SBI share price: Even if the Reserve Bank of India cuts repo rate, the impact on NIM should be negligible due to the recent hike in MCLR by 30bp, analysts said

SBI share price: State Bank of India (SBI) share price today was little changed in the early hours of Monday, November 11, as investors assessed the July-September quarter (Q2 FY25) results of India's largest state-owned lender.

 

SBI share price, on the National Stock Exchange (NSE), rose 1.3 per cent to Rs 854 per share in the intraday trade, before closing at Rs 846 per share, up 0.3 per cent. By comparison, the Nifty50 index ended 0.03 per cent lower at 24,141. 

 

Most analysts have positively revised their earnings forecasts for SBI, while maintaining their rating and one-year target price on the stock after SBI reported better-than-expected net profit in the quarter gone by, led by higher treasury income, better recoveries from written-off loans, and lower operating expenditure.

 

 

Here are SBI share price targets after Q2 results 2024:

 

Nomura | Buy | Target price: 1,050 (vs Rs 980 earlier)

State Bank of India's net profit of Rs 18,331 crore (up 28 per cent year-on-year) was ahead of our estimate, but net interest margin (NIM) declined 8 basis points (bps) quarter-on-quarter to 3.14 per cent (as against our estimate of 4bp dip).

 

The NIM outlook, however, remains steady aided by SBI's recent 30-bps increase in one-year MCLR in the first half of the current financial year (H1 FY25). SBI's 15-per cent loan growth was strong and secular across segments, and the highest among large banks. Deposit growth, too, was strong on a sequential basis. 

 

We raise FY25-27 earnings per share (EPS) estimate by 4-7 per cent, aided by lower opex and higher non-interest income. Current valuations for the core bank at 1.1-times price-to-book value, based on FY26 estimated, and 7-times price-to-earnings are attractive for 19-16 per cent return on equity (RoE) estimate over FY25-27.

 

Nuvama Institutional Equities | Buy | Target: Rs 1,026 (unchanged)

SBI's loan growth was among the highest in the sector at 15 per cent Y-o-Y and 3 per cent quarter-on-quarter (Q-o-Q). Deposits grew 9 per cent Y-o-Y and 4 per cent Q-o-Q with strong current account savings growth of 13 per cent Q-o-Q.

 

Deposit growth looks lower than loan growth due to base effect, but outstanding domestic loan-to-deposit ratio (LDR) is down Q-o-Q to 68 per cent from 69 per cent while incremental domestic LDR is a low 36 per cent, suggesting SBI does not have a liability challenge even with loan growth exceeding deposit growth.

 

The Management eyes a 14-16 per cent loan growth (highest in the sector) for FY25, a rebound in Xpress credit, double digit deposit growth, stable NIM, and RoA of at least 1 per cent. Even if the Reserve Bank of India cuts repo rate, the impact on NIM should be negligible at 5 bps due to the recent hike in MCLR by 30bp. 

 

Nuvama has cut net interest income (NII) estimates by 3.6 per cent for FY25 and 3.9 per cent for FY26. It has raised net profit estimates by 4.9 per cent and 2.5 per cent for the respective years.

 

Emkay Global Financial Services | Buy | Target: Rs 1,025 (unchanged)

SBI's Q2 slippages were lower sequentially (at Rs 4,900 crore or 0.6 per cent of loans), due to absence of seasonal agri stress which, coupled with better recovery/write-offs, led to a decline in gross and net non-performing asset ratios by 8bps and 4bps, respectively, to 2.1 per cent and 0.5 per cent.

 

The bank has reassured that its retail book, including personal loans, remain in good health as loans are mainly extended to captive and salaried customers.

 

Factoring in the healthy growth trajectory, lower staff costs, and contained loan-loss provisions, we upgrade FY25-27E earnings by 2-7 per cent and expect the bank to deliver 1-1.1 per cent return on asset (RoA) and 17-19 per cent RoE over the same period. 

Axis Securities | Buy | Target: Rs 1,040 (vs Rs 1,030 earlier)

SBI has witnessed strong growth in CA deposits, supported by multiple initiatives, along with term deposits (TD), and is now focusing on enhancing growth in SA deposits. SBI aims to reduce its dependence on government accounts for CA deposits. buoyant: The management has highlighted that growth opportunities across segments continue to remain buoyant and has reiterated its guidance of delivering credit growth of 14-16 per cent in FY25.

 

With the impact of wage revision behind, the bank will aim at maintaining a cost-to-income ratio at less than 50 per cent over the medium-term. Asset quality across segments continues to remain strong. With the bank focusing on risk-calibrated growth, we do not expect any major asset quality challenges, thereby keeping credit costs steady at 50-60bps, while gradually normalising over the medium-term.

 

ICICI Securities | Buy | Target: Rs 1,000 (unchanged)

At 14-15 per cent Y-o-Y loan growth, we see visible market share gains for SBI over the next two years. Consistent growth delivery in SME is much impressive, in our view. While we acknowledge domestic NIM (H1FY25) is back to pre-rate hike phase (FY22), we like the contained riskiness in the balance sheet.

 

We estimate SBI to deliver around 100/90bps RoA and 18/16 per cent RoE for FY25/26. On relative basis, SBI has clearly lesser challenges on growth and possibly asset quality.