Brokerages see up to 33% upside in SBI stock post record Q3 net

Brokerages maintained bullish views on the State Bank of India (SBI) stock, after India’s largest public sector lender reported highest ever quarterly profit for the December quarter on better margins. The bank expects better profitability in fourth quarter as well, led by improved asset quality, one-off gains from SBI Cards IPO and lower tax.The country’s largest lender on Friday reported a 41.18 per cent YoY rise in its standalone net profit at Rs 5,583 crore, driven by an improvement in asset quality and strong interest income.Emkay Global Financial Services maintained a ‘Buy’ rating on SBI with a 12-month price target of Rs 380.“We have raised FY20 estimates by 23 per cent, factoring in earnings beat in Q3, lumpy resolutions and one-off gains from cards IPO, partly offset by residual DHFL/ICA-related provisions,” the brokerage said.Gross non-performing assets (NPA) improved to 6.94 per cent from 8.71 per cent YoY while net NPAs stood at 2.65 per cent as against 3.95 per cent. Fresh slippages in the quarter spiked to Rs 16,525 crore from Rs 4,523 crore in the year-ago period, on account of mortgage lender- Dewan Housing Finance (DHFL).Motilal Oswal Financial Services also retained a ‘buy’ call on the stock with a price target of Rs 425, indicating a 33 per cent upside from the previous close.“SBI reported a strong operating performance in a tough quarter, led by NCLT recoveries, improving fee income trends and controlled opex. We believe that SBI has prudently improved PCR over the last few years, and has one of the lowest stressed assets amongst corporate banks, which will drive a sharp decline in credit cost to 1.3 per cent and 1.1 per cent by FY21 and FY22, respectively. Also, further NCLT write-backs or subs monetisation will boost earnings,” Motilal Oswal Financial Services said in a report.

from Economic Times https://ift.tt/36L0CQC