SBI reports another remarkable quarterly performance

SBI is a public sector bank and also the largest bank in India with a balance sheet size of over Rs 52 lakh crore. SBI has a market cap of Rs 529898 Crores and has recently announced their Q2FY23 results on 5th November 2022. During the Q2FY23, SBI reported the highest ever quarterly PAT with building strength in retail portfolios, and best-operating metrics in the PSU banking space. The overall Q2FY23 performance was robust in all aspects and mostly above the analysts’ estimates. Even the share price of the SBI has boosted after the announcement of Q2FY23 results after giving an early break out on daily charts. Brokerages have upgraded their target price for the SBI stock as they continue to remain bullish for the next few quarters as well. So, let’s now analyse their Q2FY23 results and look for the investment opportunity that remains untapped.

SBI results Q2FY23: Highest ever quarterly PAT reported in Q2FY23 supported by high double-digit NII growth

In Q2FY23, SBI posted the highest ever quarterly net profit at Rs 13,265 crores whereas its net profit rose around 74% on a YoY basis from Rs 7627 crores in Q2FY22. While QoQ it was up 2X from Rs 6068 crores in Q1FY23. SBI’s operational performance was above estimates with NII growth at 12.8% both YoY and QoQ to Rs 35,183 crores.

This was due to an improvement in NIMs (up 30 bps QoQ) to 3.55% (domestic) and high loan growth. Other income was also up 8.1% YoY and witnessed a meaningful jump QoQ as expected as Q1FY23 was impacted on account of MTM loss. In Q2FY23, trading income was at Rs 457 crores vs. a loss of Rs 6,549 crores in the previous quarter.

SBI results Q2FY23: Consistently improving asset quality

On the slippage front, SBI has been able to perform exceedingly well. As SBI’s fresh slippages declined to Rs 2,399 crore from Rs 9,740 crore in Q1FY23. Thus, the slippage ratio was 0.33% vs. 1.38% in the previous quarter. Further, Asset quality improved as the GNPA ratio fell 39 bps QoQ to 3.5% while net NPA was down 20 bps QoQ to 0.8%. For a bank that was historically known for its high NPA ratios, SBI has done exceptionally well in getting the Net NPA ratio to below 1% in Q2FY23.

Lastly, the Provisions declined 30.8% QoQ, 60.0% YoY to Rs 3,039 crores but loan loss provisions declined from Rs 4,268 crores in Q1FY23 to Rs 2,011 crores, led by lower provisions and healthy top-line growth.

SBI results Q2FY23: Robust overall credit growth

The bank also reported overall gross credit growth at 20.8% YoY to Rs 29.5 lakh crores, led by corporate loans, which was up 21.18% YoY along with 18.8% YoY growth in the retail segment. Foreign loans were up 30.1% YoY at Rs 4.87 lakh crores. While SME and agriculture loans at SBI have registered YoY growth of 13.24% and 11% respectively.

Additionally, Deposits growth came in line at 10.0% YoY to Rs 41.9 lakh crores whereas CASA deposits grew 5.4% YoY. Thus, the CASA ratio declined slightly from 45.3% to 44.63% QoQ and 46.24% in Q2FY22.

Univest View along with Technical Analysis:

SBI reported a solid overall performance, resulting in results that were significantly higher than the broker’s expectation. Furthermore, it is anticipated that the bank would maintain this level of performance in the ensuing quarters as well.

Prior to the release of the quarterly results, the NSE share price for SBI on Friday afternoon reached a new all-time high of Rs 596.95 per share. Its 50 EMA has been above both the 100 and 200 EMA for the past three months, signalling bullishness. Furthermore, a minor retraction before the next upward movement can be anticipated as the market price is currently very close to its lifetime high. From the beginning of July 2022, the stock has been in an uptrend on the charts forming a higher high and higher low formation on the charts.

ICICI Direct said, “We believe SBI with its humongous size has reported consistently upbeat performance with this quarter seeing above par growth in earnings and return ratios. The stock, long due for re-rating, should see a strong positive reaction. Hence, we retain our BUY rating on the stock with a revised target price of Rs 700.”

HDFC Securities also said, “We tweak our FY23E/FY24E estimates to factor in better NIMs and higher near-term loan growth. Maintain BUY with SOTP-based target price of Rs 700.”

Whereas on the Univest App, SBI has a Buy rating with a strong stance for fundamentals. Even for the long as well as short-term trends, SBI has a bullish momentum as per Univest. Therefore, existing investors can remain invested in the banking stock with a medium-term target price of a minimum of Rs 700. While fresh investors can also consider investing in the company with a long-term view. In the coming quarters, if SBI succeeds in maintaining its performance then investors can expect higher returns in the future.

ABOUT THE AUTHOR

Ketan Sonalkar (SEBI Rgn No INA000011255 )

Ketan Sonalkar is a certified SEBI registered investment advisor and head of research at Univest. He is one of the finest financial trainers, with a track record of having trained more than 2000 people in offline and online models. He serves as a consultant advisor to leading fintech and financial data firms. He has over 15 years of working experience in the finance field. He runs Advisory Services for Direct Equities and Personal Finance Transformation.

Note – This channel is for educational and training purpose only & any stock mentioned here should not be taken as a tip/recommendation/advice

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