NEW DELHI: Brokerages have mostly retained their bullish view on State Bank of India (SBI) after the PSU lender posted better-than-expected quarterly earnings.

SBI reported a 51.9 per cent year-on-year (YoY) growth in net profit for the September quarter at Rs 4,574.16 crore. Analysts in an ETNow poll had projected the profit figure at Rs 4,400 crore. Motilal Oswal Financial Services retained its ‘buy’ call on SBI with a price target of Rs 300, indicating an upside of nearly 45 per cent from the previous close of Rs 207.

“We believe the earnings normalisation cycle for SBI has begun, as the uncertainty brought about by the pandemic is receding significantly. We sharply raise our FY21 and FY22 estimates by 48 per cent and 25 per cent, respectively, led by healthy NII and moderation in credit cost. Core bank trades at a cheaper valuation of 1 times FY22E core PPoP and 2.3 times FY22E P/E,” the brokerage said.

The bank’s total income rose 3.42 per cent to Rs 75,341.80 crore from Rs 72,850.78 crore a year ago. Net interest income (NII) for the quarter rose 14.56 per cent to Rs 28,181 crore, while net interest margins (NIMs) came in at 3.34 per cent compared with 3.22 per cent a year ago.

LKP Securities expects more than 40 per cent upside in SBI shares with a 12-month price target of Rs 290. “We expect the bank to post 0.5 per cent ROA and 8.9 per cent ROE by FY22E on healthy balance sheet growth along with higher PCR and stable asset quality,” the brokerage said.

SBI’s asset quality improved during the quarter with gross non-performing assets (NPAs) falling to 5.28 per cent from 5.44 per cent in the preceding quarter and 7.19 per cent in the same quarter a year ago.

Morgan Stanley is ‘overweight’ on the PSU bank with a price target of Rs 280.

“SBI’s Q2FY21 earnings were much better than we expected on pre-provision operating profit (PPOP) and asset quality trends. Overall collection efficiency was around 97 per cent in September 2020 and has improved further in October 2020 – this wasn’t very different for the retail segment and is helped by 70 per cent loans to salaried borrowers. This also implies relatively good trends in the SME segment, partly helped by the government guarantee package. The bank guided to potential stress of 2.5 per cent of loans for FY21 (much lower than our estimate of around 4 per cent of loans),” the global brokerage said.

SBI shares traded 5.39 per cent higher at Rs 218.25 around 10 am (IST) even as BSE benchmark Sensex surged 555 points, or 1.37 per cent, to 41,170.

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