SBI Q1 Earnings Beat: Brokerages Raise Target Prices

State Bank of India (SBI) recorded robust June-quarter earnings, prompting several brokerages, including JPMorgan and Citi, to raise their target prices for the lender. The positive adjustments follow a comprehensive beat across key financial metrics, encompassing net interest margin (NIM), substantial loan growth, increased fee income, and enhanced operating efficiency.

Bernstein maintained its ‘Market Perform’ rating for SBI, acknowledging the sequential improvement in NIM and the bank’s strong loan growth performance.

Key Q1 Financials

• Interest income rose 8.5% to Rs. 1,27,896 crore.
• Net interest income increased 14.9% to Rs. 46,992 crore.
• Net profit climbed 10.2% to Rs. 21,121 crore.
• Operating profit saw a 9.8% rise.
• Domestic NIM improved to 3% from 2.93% sequentially.
• Global NIM also rose to 2.86% from 2.81%.

Asset quality remained stable for SBI. Gross Non-Performing Assets (GNPA) improved to 1.47%, while Net Non-Performing Assets (NNPA) stood at 0.38%.

Despite a 27.6% sequential increase in fresh slippages, reaching Rs. 7,046 crore, total provisions rose by 75.7% to Rs. 5,047 crore. Significantly, credit cost declined to 0.27% from 0.47% year-on-year. Fee income surged by 20.8% year-on-year to Rs. 9,476 crore, with the cost of deposits decreasing to 4.85% from 5.04% sequentially. Return on assets improved to 1.14% from 1.11%.

Management Outlook & Brokerage Views

SBI management reported accelerated credit growth across retail, agriculture, MSME, and corporate segments. Overall deposits increased by 10% year-on-year. The bank has mobilized nearly $6 billion through FCNR(B) deposits and aims to raise approximately $10 billion under this scheme. For FY27, SBI projects credit growth of 14-15% and deposit growth of 10-11%, while maintaining a domestic NIM target of 3%.

• JPMorgan: Maintained ‘Overweight’, raising target price to Rs. 1,280 from Rs. 1,240. Cited strong Q1, sequential NIM expansion, lower credit costs, and benign asset quality.
• Citi: Maintained ‘Buy’, increasing target price to Rs. 1,300 from Rs. 1,230. Highlighted strong beat driven by NIM, fee income, cost efficiency, and 19% year-on-year advances growth.
• Bernstein: Maintained ‘Market Perform’ with a target price of Rs. 1,300. Noted steady quarter, 19% year-on-year loan growth across segments, and stable asset quality despite seasonal slippages.