SBI Q1 results 2024

SBI Q1 Earnings Exceed Expectations; Strong Asset Quality Boosts Analyst Confidence and Brokerages Maintain Positive Outlook

The State Bank of India (SBI), the country’s largest lender, reported impressive fiscal first-quarter earnings for FY25, surpassing market expectations. This strong performance has led to a positive outlook from most brokerages, with many maintaining bullish calls on the bank despite some differing opinions.

Key Financial Highlights

• Net Profit: SBI’s net profit for Q1FY25 rose by approximately 1% year-on-year to ₹17,035.16 crore.
• Net Interest Income (NII): The bank’s NII increased by 5.7% YoY to ₹41,125 crore, beating analyst forecasts.
• Gross Non-Performing Assets (NPA): The gross NPA ratio improved to 2.21% as of June 30, compared to 2.76% a year ago.
• Net NPA: The net NPA ratio fell to 0.57% from 0.71% in the same quarter of the previous year.
• Gross NPAs: Absolute gross NPAs stood at ₹84,226 crore, down from ₹91,328 crore a year earlier.

Analyst Ratings and Target Prices

1. CLSA:
   • Rating: Outperform
   • Target Price: ₹1,075 per share
   • Comments: CLSA highlighted SBI’s healthy loan growth despite slower deposit growth. Asset quality remained stable, though credit costs increased.
2. Investec:
   • Rating: Buy
   • Target Price: ₹880 per share
   • Comments: Investec praised SBI for controlling operating expenses (opex) and delivering a strong return on assets (RoA) in a typically weak quarter. They expect robust credit growth of 15% YoY for FY25.
3. JPMorgan:
   • Rating: Overweight
   • Target Price: ₹1,000 per share
   • Comments: JPMorgan noted a 15% YoY growth in gross advances and stable asset quality. They observed that SBI’s opex growth has moderated significantly, supporting their positive outlook.
4. UBS:
   • Rating: Sell
   • Target Price: ₹725 per share
   • Comments: UBS expressed concerns about the sustainability of SBI’s current RoA and anticipated that increasing credit costs could impact profitability. They pointed out low core Pre-provision Operating Profit (PpOP) relative to assets and insufficient counter-cyclical buffers.

Market Performance

• Stock Performance: SBI’s stock has surged nearly 48% over the past 12 months and has provided returns of around 32% year-to-date, outperforming the benchmark Nifty’s 14% return during the same period.
• Pre-Earnings Movement: Ahead of the Q1 results, SBI shares closed 1.7% lower at ₹847.75 on the National Stock Exchange (NSE).

Advantages

1. Strong Loan Growth: SBI reported robust loan growth, which indicates a healthy demand for credit and a growing customer base.
2. Stable Asset Quality: The improvement in NPA ratios suggests effective management of non-performing assets and strong credit quality.
3. Solid Net Interest Income: The increase in NII reflects better margins and higher profitability from core banking operations.
4. Positive Market Sentiment: The stock’s substantial rise over the past year highlights strong investor confidence and positive market perception.

Disadvantages

1. Rising Credit Costs: Increasing credit costs could pressure profitability and impact future earnings, as noted by some analysts.
2. Lower Core Pre-provision Operating Profit (PpOP): UBS highlighted concerns over the relatively lower PpOP to assets, which may affect profitability.
3. Deposit Growth Lag: Slower deposit growth compared to loan growth could lead to liquidity challenges and impact net interest margins.
4. Market Volatility Impact: The stock market’s recent volatility and global economic uncertainties could affect SBI’s performance and investor sentiment.

Conclusion

SBI’s Q1 FY25 performance has generally been well-received, with many brokerages maintaining a positive stance on the stock. The bank’s strong loan growth, stable asset quality, and effective cost management have impressed analysts, despite some concerns about future profitability and credit costs. Investors should weigh the advantages and disadvantages as they navigate their investment decisions.

FAQs

1. What were the key highlights of SBI’s Q1 FY25 earnings?
   • SBI reported a 1% increase in net profit, a 5.7% rise in NII, and improved NPA ratios.
2. What is the general outlook from analysts on SBI’s stock?
   • Most analysts are bullish, with target prices ranging from ₹725 to ₹1,075 per share, though UBS has a “sell” call due to concerns over future profitability.
3. How has SBI’s stock performed recently?
   • SBI’s stock has risen nearly 48% in the past year and 32% year-to-date, outperforming the Nifty index.
4. What concerns are analysts expressing about SBI?
   • Concerns include the sustainability of SBI’s current RoA and potential impacts from rising credit costs, as highlighted by UBS.
5. How did SBI’s performance impact its stock price before the earnings announcement?
   • The stock fell 1.7% to ₹847.75 on the NSE ahead of the Q1 results.

SBI Q1 results 2024

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