SBI shares surge about 7% as brokerages upgrade stock, increase target price

State Bank of India

Shares of State Bank of India on Thursday surged as much as 7% as many brokerages upgraded the stock and increased its target price after the lender reported better than expected earnings.

SBI gained as much as 6.8%, to hit a high of Rs220.95 on BSE. At 9.50am, the scrip was trading at Rs218.15 on BSE, up 5.4% from its previous close.

SBI reported a 52% year-on-year (y-o-y)jump in net profit in the September quarter to Rs4,574 crore backed by robust growth in retail loans and lower provisions for bad loans.

“SBI’s current core valuation is lower than other state banks, which is unwarranted, given SBI’s strong deposit franchise, market leadership in home loans and strong traction in retail disbursals. We revise our earnings to build higher NIM and fees,” said Elara Capital in a note to its investors.

SBI has seen home loan sanctions rise 29% y-o-y, although disbursement—which usually comes with a lag—was up 12% y-o-y. Growth in retail lending was broad-based, including auto loans where sanctions grew 29%, and subsequent disbursements increased 27% from the same period last year.

“We believe the earnings normalization cycle for SBIN has begun, as the uncertainty brought about by the pandemic is receding significantly,” said Motilal Oswal in a note to investors. The brokerage firm has reiterate buy with target price of Rs300 a share.

BoB Capital has upgraded the stock to buy from add and upped its target price to Rs260 from Rs219 a share, Elara Capital has recommended buy rating on the stock and increased its target price by 23% to Rs255 a share, Dolat Analysis & Research Themes has maintained buy rating and increased its target price to Rs280 a share, Antique Stock Broking has maintained buy rating and increased its target price by 35% to Rs280 a share.

The bank’s gross bad loans as a percentage of total advances declined 16 basis points (bps) sequentially to 5.28%. It would have been higher at 5.88% had it not been for the Supreme Court standstill on asset classification for a specific set of accounts. This would have amounted to additional slippages of Rs14,388 crore.

News Source:- livemint

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