SBI shares surge post strong Q3 results. What should investors do?


India’s biggest bank State Bank of India (SBI) reported 62% jump in standalone net profit at 8,432 crore for the quarter ended December 2021, helped by lower provisions, as compared to 5,196 crore in the year-ago quarter. Shares of SBI surged in Monday’s opening deals to 531 apiece on the BSE.

The lender’s net interest income (NII), difference between interest earned and expended, rose over 6% to at 30,687 crore whereas net interest margin (NIM) improved to 3.40% as against 3.34% year-on-year (YoY).

SBI has delivered a robust 3QFY22 and the PSU bank has been reporting continued traction in earnings every successive quarter, aided by controlled provisions, highlighted Motilal Oswal in a note. “SBI remains our conviction Buy in the sector. We revise our target price to 725 per share,” the brokerage added.

The bank’s gross non-performing assets (GNPA) ratio reduced to 4.50% whereas Net NPA ratio stood at 1.34%. Its total provisions declined to 10,090 crore from 12,137 crore in the year-ago period, as per the presentation uploaded on the exchanges. During the quarter, the bank made an additional provision of 1,700 crore as a prudent measure, SBI Chairman Dinesh Khara said.

“Asset quality improved, with GNPA ratio declining by 40 basis points (bps) QoQ to 4.5%. With the asset quality outlook positive and a healthy provisioning buffer, credit cost is expected to trend lower compared to the recent past, thereby aiding return ratios. The bank has reiterated its 15% ROE guidance,” said analysts at Nirmal Bang, maintaining Buy rating on SBI stock with a target price (TP) of 639.

With further pick-up in utilization level, the corporate book could start to deliver better growth rates and support overall bank credit growth, the brokerage note added.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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