SBI share price rose the most on Sensex, Nifty in early trade today. Analysts gave a thumbs up to the lender's strong Q2 earnings as it set off losses from one-time gain of Rs 3,500 crore from the sale of 4.5% stake in its life insurance arm. The lender also raised provisions coverage to more than 80 per cent, the highest in more than a decade.
SBI share price rose 4.24% or 12 points to Rs 302.25 compared to the previous close of Rs 289.95 on BSE. On NSE, the stock rose up to 4.31% to Rs 302.45 against previous close of Rs 289.90. SBI share price closed 7.69% or 22.30 points higher at 312.25 on BSE.
The stock was top gainer on Sensex and Nifty today. SBI share has risen 6.74% in last two days. SBI stock has gained 7% in last one year and gained 1.59% since the beginning of this year.
In an analyst call yesterday post its Q2 earnings, the lender threw light on its financial performance which led the stock higher in trade today.
Brokerages were more upbeat on the state-owned lender and gave buy calls on the large-cap stock. Jefferies gave a buy call with a target price of Rs 385. It said the bank has put forward its strategies for streamlining risk appraisal and is focusing on risk adjusted return. The lender plans on building value in its subsidiary business and long-term credit cost to achieve 1% return on assets by FY21 in conservative scenario, the brokerage said.
CLSA gave a target price of Rs 390 for the lender and expects slippages to moderate from FY21. FY20 will see higher slippages, especially as large cases such as DHFL default, the brokerage said. HSBC went a step ahead and gave a target price of Rs 400. The brokerage said the bank showcased its revamped credit underwriting and retail/digital franchise. The lender plans to lift its return on assets in FY21, led mainly by credit cost, but also improving operating profit.
SBI share has risen 15.20% since the lender announced its Q2 earnings on October 25. On October 24, the stock closed at Rs 262.70 and it hit an intra day high of Rs 302.65 in early trade today.
Rahul Agarwal, Director at Wealth Discovery/EZ Wealth said, "SBI is expected to continue to report double-digit growth in loans in next couple of years; NII is expected to rise to over 17 percent in current financial year and 14 percent in FY21 against 18.03 percent in FY19 while the NIM is expected to be more than 3.2 percent in FY21 compared to 2.95 percent in FY19. Furthermore, the management sees provision coverage ratio improving to 84 percent this year and further to 88 percent in next year against 78.73 percent in FY19 SBI has shown a better management in slippage, while it has also created higher provision by using the gain from the stake sale in SBI Life. The numbers were good this quarter, but it has to be seen that how the bank will be able to sustain this pace of improvement. Although the stock has rallied in recent days, it's still trading lower than its July high of Rs 372. It appears that the worst is over for the stock and for investors who are already long this stock, they can continue to hold their positions. For investors who are trying to get in perhaps, it's the right time to accumulate the stock with a long term perspective despite the significant rally the stock has seen this week."
The public sector bank reported a nearly three-fold jump in its consolidated net profit to Rs 3,011.73 crore for the second quarter ended September 30 against Rs 944.87 crore in the corresponding quarter of the previous fiscal. The lender's net income stood at Rs 72,850.78 crore in the July-September quarter, up from Rs 66,607.98 crore. Net interest income climbed 17.67% to Rs 24,600.32 crore, from Rs 20,905.69 crore in the corresponding period last year.
On a consolidated basis, SBI reported a nearly six-fold jump in its consolidated net profit to Rs 3,375.40 crore for the second quarter ended September 30.
The lender posted Rs 576.46 crore net profit in the July-September quarter of previous fiscal. Total income of SBI group rose to Rs 89,347.91 crore in Q2, compared to Rs 79,302.72 crore in the year-ago period.
Asset quality of the bank improved with the gross non-performing assets (NPAs) falling to 7.19 per cent of the gross advances as on September 30, 2019, from 9.95 per cent a year ago. Net NPAs or bad loans too declined to 2.79 per cent of the advances from 4.84 per cent in the year-ago period.
By Aseem Thapliyal