SBI shares rise as Q2 earnings beat estimates. Should you buy, sell, or hold?

Shares of India’s largest public sector lender State Bank of India (SBI) jumped 1% to their day’s high of Rs 851.75 on the BSE after the bank beat earnings estimates by a wide margin, reporting a profit of Rs 18,331 crore, up 28% year-on-year (YoY).

An ET Now poll had estimated the profit to be around Rs 15,550 crore.

Net interest income for the quarter rose 5% YoY to Rs 41,620 crore, compared to Rs 39,500 crore in the same period last year.


The pre-provision operating profit increased 51% YoY to Rs 29,294 crore in the July-September 2024 period, compared with Rs 19,417 crore in the corresponding period last year.

The NII growth, which was largely in line with estimates, is slower than the average loan growth due to the rise in the cost of deposits outpacing the yield on advances.

Should you buy, sell, or hold SBI's stock? Here's what analysts say:

CLSA

CLSA maintained an 'Outperform' rating on SBI with a target price of Rs 1,075.

The report highlights that loan growth remains healthy; however, deposit growth is lagging on a year-on-year basis. There has been a marginal decline in net interest margin (NIM), but asset quality remains intact. CLSA forecasts a return on equity (ROE) of 15%-16% over the medium term.

Nomura

Nomura maintained a 'Buy' rating on SBI, raising the target price to Rs 1,050 from Rs 980.

The bank is recognized for sector-leading growth and healthy deposit growth. Its asset quality performance remains robust, and the cost-to-income ratio is at its lowest level since FY18. Current valuations, with the core bank trading at 1.1x FY26 price-to-book (P/B) ratio, are considered attractive. SBI continues to be a top pick in the sector.

Jefferies

Jefferies maintained a 'Buy' rating on SBI and raised the target price to Rs 1,030 from Rs 1,000, citing stability in retail asset quality as a positive factor.

The bank continues to show healthy loan growth, though there is room for improvement in deposit growth. Operating results have been bolstered by treasury gains and the write-back of staff cost provisions. Additionally, the bank's capital market-related subsidiaries performed well during the period.

IIFL

IIFL maintained an 'Add' rating on SBI and raised the target price to Rs 920 from Rs 900.

The positive performance was driven by strong non-core income and lower operating expenses. However, net interest margin (NIM) contracted as the loan-to-deposit ratio (LDR) declined. IIFL projects a 13% compound annual growth rate (CAGR) in loans, which is slightly below the management's 14-16% guidance due to an elevated international LDR. The firm also anticipates a 9% CAGR in earnings per share (EPS) over FY24-27, influenced by range-bound NIMs.

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