“Exposure to Adani Group at 0.9% is slightly ahead of PSU banks (0.7%), but mostly to operating/cash flow-making entities and there is no promoter pledge. We see limited risk,” Jefferies said.
The brokerage has raised its FY23 earnings estimate by 11% and FY24-25 estimates by 4-5%. It is factoring in a 4% CAGR in loans over FY22-25, which along with margin expansion and lower credit cost should aid ROE of 17% in FY24.
“The bank may also require raising capital with its Common Tier I CAR at 11% (vs min of 7%), but management may look at stake sales in subsidiaries to mobilise capital first,” it said.
Jefferies has
among its sector top picks with a “Buy” rating and a target price of Rs 760, representing an upside of 44%. In an upside scenario, the target price is set at Rs 860, with a potential upside of 61%.
SBI posted 68% year-on-year (YoY) growth in net profit at Rs 14,205. This is the highest-ever quarterly profit figure reported by the bank.
Its net interest income (NII), the difference between interest earned and interest expended, rose 24% on year to Rs 38,068.62 crore. Meanwhile, the domestic net interest margin (NIM) for the quarter increased 29 basis points YoY to 3.69%.The public-sector lender saw provisions for the quarter drop by more than 17% YoY to Rs 5,761 crore. Of this, the provision for non-performing assets was Rs 1,586 crore compared with Rs 3,096 crore a year ago. The bank’s operating profit grew by over 36% on year to Rs 25,219 crore.
Commenting on the third quarter results, Jefferies said that the bank continues to see strong asset quality trends that helped to bring down gross non-performing loans (NPLs) by 18% YoY to 3.1% of loans.
“Like peers, SBI has benefited from a surge in corporate credit demand that has boosted loan growth and upfront repricing of loans. We expect NIMs to peak in the fourth quarter/first quarter and then start normalising downwards,” it said.
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