State Bank of India’s (SBI) share price rose in the early trade on Thursday after the state-run largest lender reported its June quarter earnings.

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SBI posted a sharp 55.3 percent rise in net profit for the first quarter of the current fiscal at Rs 6,504 crore as compared to Rs 4,189.3 crore, YoY, led by lower provisioning.

The bank's net interest income (NII) was at Rs 27,638 crore in Q1FY22, registering a growth of 3.7 percent from Rs 26,641.6 crore, YoY.

The bank's net profit was above the street expectations, as a CNBC-TV18 analysts' poll had estimated profit at Rs 6,374.5 crore for the quarter, while NII was 4.3 percent lower than the estimates.

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SBI Q1 results: Net profit rises 55% to Rs 6,504 crore; beats estimates; NII growth at 3.7% YoY

Here is what brokerages have to say on SBI's stock and Q1 earnings:

CLSA

SBI's 1QFY22 PAT/core PPOP of Rs 65 billion/Rs 135 billion were in line with estimates, with the miss on NII made up for with fees/higher treasury income. Higher-than-expected slippage of Rs 163 billion needs to be looked at in the context of no moratorium, negligible use of restructuring, already improving recoveries in Jul 2021 and it was relatively the best asset quality performance among the large banks, CLSA said.

The NII miss was driven by yield pressure and a lack of growth which leads to a 1%-3% cut in our PPOP/PAT estimates. We still expect SBI to deliver a 14% ROE in FY22CL and a 15% ROE from FY23CL, it added.

CLSA maintained ‘buy’ rating and target price of Rs 650.

Jefferies

SBI reported a profit of Rs 65 billion, up 55 percent YoY, led by other income and a tad lower provision. Slippages at 2.8 percent of past loans were above expectations, but 30 percent was recovered in July and we see scope for upgrades in 2Q-3Q, Jefferies said.

Despite stronger Casa, SBI has lagged on loan growth (six percent) due to a quest for NIMs & asset quality that limited growth in corporate and SME loans. We see that priority staying, hence growth may lag.

Jefferies raised its credit cost estimates marginally to factor the Covid 2.0 impact but expects trends from 2Q onwards to move towards normalised levels.

We trim our FY22-23 EPS by four percent as we incorporate marginally lower NII and provisions estimates.

The brokerage reiterated a ‘buy’ rating and raised the target price to Rs 550 per share from Rs 520 earlier.

Macquarie

Macquarie has raised the target price on the stock to Rs 580 citing higher value in core business and subsidiaries. The asset quality performance is better than most peers and price to book value is attractive at current levels, it said.

SBI is the top PSU pick by Macquarie. It maintained an ‘outperform’ rating on the stock.

Goldman Sachs

Strong Q1 with core operating performance was ahead of estimates. The lower-than-expected provisions lead to a beat on profit, while asset quality stood out in the quarter where slippages were higher, said the brokerage.

The recovery momentum has picked up and underlying book health seems intact.

Goldman Sachs increased earnings estimates by 2% on average over FY22-24. It maintained a ‘buy’ rating and a target of Rs 728.

Morgan Stanley

The bad loan formation at 1.0 percent of loans was broadly in-line, while slippages were higher and restructuring is lower versus our estimates. The core PPoP missed estimates on lower margin and slower growth in the balance sheet, Morgan Stanley said.

The brokerage reduced the EPS estimate by 3-4 percent. It has an ‘overweight’ rating with a target of Rs 600 per share.

Motilal Oswal

SBI reported steady performance in a challenging environment, with strong earnings led by controlled provisions. However, business trends were modest, impacted by the lockdowns. Asset quality remains broadly on track despite elevated slippage, led by Retail/SME. However, restructuring and the SMA pool remain in check, said the brokerage house.

It expects slippage to subside going ahead, assuming there is no third COVID wave or no severe impact from it.

It maintains estimates for FY22/FY23 and project RoA/RoE of 13.1%/14.6%. It also maintained a ‘buy’ call with a revised target price of Rs 600 per share.

At 10:45 am, the shares of SBI were trading 2.67 percent lower at Rs 444.85 apiece on the BSE.

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