SBI shares: Should you buy the bank stock after record profit in Q3?

 

State Bank of India's (SBI) third quarter net profit reaches record high better than expected

India's largest lender State Bank of India (SBI) reported a better-than-expected 68.5% rise in quarterly profit to a record high of ₹14,205 crore, boosted by better interest income and decline in bad loan provisions. According to analysts, the lender reported a healthy performance for Q3 FY23 on the operational front driven by NIM expansion and higher other income.

"The management is confident that low deposit growth is not a concern for them as the credit-to-deposit ratio is still low. Core operating profit registered a healthy growth. Asset quality continued to show improvement on the back of higher writeoffs. Bank Registered ROA/ROE stands at almost a decade high of 1.1%/18.2%. We maintain buy on SBI shares with a target price (TP) of ₹667, said brokerage Nirmal Bang Institutional Equities.

Credit growth at state-owned SBI stood at 17.6% for the reported quarter, which saw retail and corporate loans grow by nearly 18%, while deposits grew by 9.51%.

“Bank outperformed on all parameters driven by strong NIM expansion, traction in credit growth, improved treasury performance (MTM reversals) and improved credit behavior. Investment redemptions amounting to ₹3.2 trillion with deposit growth of +17% Will support credit growth. ~9-10% in FY23. We believe SBI will benefit from traction in credit growth and improvement in CD ratio. We maintain our positive outlook on the bank given the strong business movement and tailwind on NIM Maintain stance," PhilipCapital said with a buy rating on the bank stock and a target price of ₹730 per share.

Edelweiss's earnings outlook remains strong, but there is not enough information on how a large exposure to the system will play out. The brokerage has maintained 'Buy' on SBI (TP: ₹650) keeping a view on the above upside risks.

“Our current earnings outlook for SBI remains strong with 1% ROA through our forecast period. Management guided for NIM to remain at current high levels. We have posted strong earnings, but watch SBI's exposure to the larger group. Bank disclosures show that the share of bank credit to this group is as high as 33%," the note said.