On 4 February 2022, the shares of the State Bank of India (SBI) achieved a new 52-week high at Rs. 546.40 apiece. SBI shares began with a Rs. 2 increase per share and continued to rise till they got a new 52-week high in their early morning trades. However, it would end at Rs. 10.65 lower from its previous day closing price on the NSE after much profit-booking.
Many experts have concluded that more gains are expected after this as SBI has recently posted strong Q3 results. Brokerage firms have recommended this stock as ‘buy’ and expect that it will likely see a further 37% increase to Rs. 725/per share.
Now let us examine the reasons for SBI share’s growth and its future expectations.
SBI Reports a Strong Financial Performance for Q3 FY 2021-22
On 5 February 2022, SBI reported its earnings for the December 2021 quarter. Its standalone net profit had increased by 62% to Rs. 8,432 crores for Q3 FY 22, against Rs. 5,196 crores in the previous year. As a result of lower provisions, these shares managed to beat analysts’ prediction of Rs. 7,957.4 crores.
The bank’s NII (Net Interest Income) for the December quarter improved to Rs. 30,687 crores, a 6.48% increase over the previous fiscal. Its NIM (Net Interest Margin) rose by 3.40%, compared to 3.34% on a YoY (year-on-year) basis.
This is on the back of an 11.15% rise in home loans which contributes 24% of domestic advanced of the bank. Lending in the corporate and SME (small and medium-sized enterprise) lending segment has also seen similar growth.
Deposits at SBI has also seen an overall increase for the December quarter. Its total deposits have increased by 8.83%, while its current account deposits have grown by 7.89% from the previous quarter. Its total savings bank deposits have grown by 10.30% during the 3rd quarter.
Its asset quality, too, continued a significant improvement as its GPNA (gross non-performing assets) ratio fell by 4.50% for Q3, compared to 4.9% in the previous quarter. SBI’s Net NPA ratio stood at 1.34%, while its total provisions declined from Rs. 12,137 crores in last year to Rs. 10,090 crores.
With its GNPA ratio declining by 40 basis points, SBI has a positive asset quality outlook. It also has a healthy provisioning buffer as the bank has made a Rs. 1,700 crores provision as a prudent measure. With a further pick-up in utilisation level, SBI’s corporate book could see even better growth rates supporting its overall credit growth.
SBI’s Shares Reach 52-Week High Following Q3 Report
SBI’s shares have seen a 0.84% increase to Rs. 535 as on 13:19 PM on 7 February 2022 after the company had reported robust financial earnings for Q3 FY 22. It had opened at Rs. 531.90 and rose to its 52-week high at Rs. 549 during the day, surpassing its previous high at Rs. 546.35 on 4 February. The shares were trading at a volume of 4.17 crores and a market cap of Rs. 4,77,823 crores.
For the past one month, SBI’s shares had increased 8.93%, from Rs. 503.65 to Rs. 535.10. In 2022 alone, its shares have risen by 16%, whereas in the last six months, it has seen a 26% growth. Improved asset quality and increased net interest margins indicate the likelihood of further improvement for shares of India’s largest public sector bank.
Many market experts have stated that its share price may see further upsides to Rs. 600 per share in the immediate short-term. SBI share price could do up to Rs. 650 per share in the short to medium term. As such, various brokerage firms have made their recommendations about SBI’s shares.
Expectations for SBI’s Shares from Various Brokerage Firms
Profitmart Securities: This brokerage firm recommended that investors without SBI shares in their portfolio add them. Existing shareholders are told to hold this stock for short to medium term.
Choice Broking: Its Executive Director said that SBI’s shares look positive, and investors may want to buy them at current market prices for the immediate short-term target of Rs. 580 – Rs. 600.
JM Financial Services: The brokerage firm has maintained a positive stance on SBI’s shares and recommended ‘buy’ with a target price of Rs. 610. It expects SBI’s BVPS to be beyond expectations at 1.25x by FY 24 and an RoA and RoE of 0.96% and 16%, respectively.
Motilal Oswal: This domestic research and brokerage firm has stated that SBI has bravely fought off COVID-19 impacts to deliver robust financials. It has continued ‘buy’ recommendations for SBI shares and revised its target price to Rs. 725.
Most brokerage firms have made a ‘buy’ recommendation for SBI shares and predicted further upsides after strong Q3 results. Stock market experts have stated that PSU-banks are expected to make the most of the rising liquidity demand in the infrastructure sector. With SBI being the leading lender and having no liquidity problem, these experts believe it will grow further in the next quarters.
However, stock market investments always come with inherent risks. Investors may want to exercise caution and do their due research before making investments.
Frequently Asked Questions
How did State Bank of India’s shares perform in the previous financial quarter?
SBI reported robust earnings in Q2 FY 21-22 with profits of Rs. 7,626.6 crores, up 66.7% from the previous year. Its NII had surged to Rs. 31,183.9 crores, up 29% from the previous year’s quarter.
What was SBI’s asset quality in Q2 FY 21-22?
In the previous quarter, SBI’s gross NPA was down 4.9% (or 42 basis points), while its Net NPA was down 1.52% (or 25 basis points). As such, its asset quality had improved along with its profits.
How many branches and offices do SBI have in India?
SBI is India’s largest bank, with a quarter of the market share and a vast network of 22,000 branches. It has over 62,617 ATMs/ADWMs and 71,968 BC outlets in India.
Disclaimer: This blog is exclusively for educational purposes and does not provide any advice/tips on investment or recommend buying and selling any stock.