Shares of the country's largest public sector bank State Bank of India (SBI) fell as low as 2% during the morning trade on Monday after SBI recorded a 35% YoY fall in net profit to ₹9,200 crore in the October-December 2023-24 quarter, missing analyst estimates.

The bank's PAT was primarily impacted by a “higher wage revision provision” of ₹6,300 crore vs ₹5,000 crore, which was factored in. The stock opened a gap down at ₹641.30 and fell to an intra-day low at ₹638.50 before settling at ₹648. The stock is currently trading 1.8% below the 52-week high of ₹660.40 touched on December 12, 2023. At the current share price, SBI's m-cap stands at ₹5.7 lakh crore.

SBI shares surged 3.66% in the past week and rose 0.93% in the past month. In the past six months, year-to-date and one-year period, the stock has risen 14.01%, 0.95%, and 18.71%, respectively.

Meanwhile, the bank's net interest income (NII) was in line with expectations at ₹39,800 crore, up 4.6%. The net interest margin (NIM) declined marginally to 3.22% as the outcome of an increase in the cost of funds.

Other income declined 0.08% YoY, while the fee income was up 5.3% YoY at ₹6,200 crore. Regarding asset quality, SBI's gross NPA ratio at 2.42% improved by 72 bps YoY in Q3 FY24, while the net NPA ratio at 0.64% improved by 13 bps YoY. The bank's slippage ratio for Q3 FY24 increased 17 bps YoY and stood at 0.58%. Its capital adequacy ratio (CAR) at the end of Q3FY24 was recorded at 13.05%.

The cost to income, excluding one-time provision, increased to 63.4% vs 52% in Q3FY23. The bank says its employee cost will remain at ₹22,200 crore in Q4 FY24 due to a final provision of ₹5,400 crore on wage arrears.

On the bank's performance, Antique Stock Broking says the overperformance of the bank was "healthy and the bank continues to gain from the low credit cost cycle". The brokerage has maintained a "BUY" call on the stock, with a target price of ₹750. "We largely maintain our earnings for FY25/ 26 and expect SBIN to report a RoA of 0.9% and RoE of 17%. Maintain BUY with an unchanged TP of INR 750 (1.2x FY26 core BV + INR 189 for subsidiaries)."

Another brokerage Phillip Capital says sustainability in credit growth and stable NIM will drive core earnings at the bank. It has also maintained a "BUY" call on the stock, with a target price of ₹720, with an upside of 11%.

"Credit cost to remain low at 0.2-0.5% in next few years, translating into ~1% ROA between FY24-26E. Maintain Buy with a revised TP of ₹720 (earlier ₹660). At CMP, stock trades at 1.4x/1.2x/1x FY24E/25E/26E core ABVPS of ₹344/421/465 (subs. Value of ₹160 per share)," the brokerage says.

Follow us on Facebook, X, YouTube, Instagram and WhatsApp to never miss an update from Fortune India. To buy a copy, visit Amazon.