Shares of State Bank of India (SBI) fell more than 2% in early trading on Monday as the
largest lender in the nation announced a 6 per cent decline in its standalone net profit at
6,068 crore for the quarter ended in June, missing estimates due to mark-to-market (MTM)
losses. From 27,638 crore to 31,196 crores, Net Interest Income (NII) grew by almost 13%.
Due to MTM losses totalling Rs. 6,549 crore on its investment book, the lender’s return on
assets (RoA) and return on equity (RoE), which were down nine basis points (bps) and 203
bps, respectively, took a knock.
The rise of SBI’s net profit was hampered by MTM loss. PCR for the bank now stands at
75%, with standard loan coverage at 105%. The current coverage ratios indicate a healthy
provisioning buffer. The forecast for asset quality is favourable, and the credit cost is
predicted to stay low (1%). Another brokerage firm, Nirmal Bank, maintained a Buy rating on
the bank stock with a target price (TP) of 678 per share and said that the standalone bank is
now trading at less than book value for a projected ROE of 15% by FY24E.
Why brokerages are optimistic about SBI shares
despite the bank stock’s poor Q1 performance
