Should investors buy, sell or hold SBI shares after Q4 results?

The share price of State Bank of India (SBI) was trading higher on Friday, in an otherwise volatile broader market, after the country’s largest lender reported better-than-expected earnings in the March 2023 quarter. The upmove follows the PSU lender’s strong fourth-quarter earnings, which was boosted by robust business growth, uptick in net interest income, other income, as well as contained credit costs. Post Q4 results, most analysts have maintained “Buy” ratings on the SBI with 11 analysts offering long term price targets for the lender at an average target of ₹715.10, an upside of 24% from Thursday’s closing price.

On Friday, SBI shares opened at ₹574.15, up 0.9% against the previous closing price of ₹574.15 on the BSE. In the first two hours of trade so far, the heavyweight rose as much as 2.1% to ₹586.05, while the market capitalisation climbed to ₹5.13 lakh crore.

At the current price level, the shares of SBI trade 7% lower than its 52-week high and 36% higher than its 52-week low. The counter touched a 52-week high of ₹629.65 on December 15, 2022, and a 52-week low of ₹430.80 on June 20, 2022. In the last one year, the blue chip stock has risen 29%, while it has fallen 4% in a six-month period. In the calendar year 2023, the counter has lost 6%, whereas it has gained over 6% in a month.

For the January-March quarter of 2023 (Q4FY23), SBI clocked 83.18% growth in its net profit at ₹16,695 crore as compared to ₹9,114 crore during the same period last year. The profit for the full financial year 2023 crossed ₹50,000 crore mark to ₹50,232 crore, registering a growth of 58.58% compared to previous fiscal.

The net interest income (NII) for FY23 increased 29.47% YoY to ₹40,393 crore from ₹31,198 crore in the year-ago period. For the whole year the NII surged 19.99% to ₹1,44,841 crore vs ₹1,20,708 crore in FY22.

The bank's operating profit for FY23 grew 11.18% YoY to ₹83,713 crore, up from ₹75,292 in the previous year; it grew 24.87% YoY in Q4 to ₹24,621 crore, up from ₹19,717 crore in the same period last year.

In terms of asset quality, SBI said its gross NPA ratio was recorded at 2.78%, down by 119 bps YoY, while its net NPA ratio at 0.67%, down by 35 bps YoY. The PSB's capital adequacy ratio (CAR) at the end of FY23 improved by 85 bps YoY to 14.68%.

Analysts view on SBI Q4 results

ICICI Securities has maintained a “Buy” rating on SBI shares after Q4 results, with a revised target price of ₹730 from ₹805 earlier. “Despite sharp QoQ rise in opex, SBI once again reported a strong quarter with Q4FY23 PAT at ₹16,690 crore and annualised RoA at 1.23%, driven by strong business growth, NIM uptick, strong ‘other income’ and contained credit costs. Both loan and deposit growth was strong (and better than expected) at around 4.6-5.0% QoQ while net slippages turned negative,” it said in a report.

Analysts at JM Financial has also maintained a “Buy” rating and raised the price target to ₹700 from ₹675 estimated earlier, indicating a potential upside of nearly 22% from Thursday’s closing price, citing strong earnings. “SBIN reported a robust quarter: a) healthy core PPOP growth of +19.5% YoY, b) continued loan growth momentum (4.3% QoQ, 16% YoY) and robust asset quality (GNPLs/NNPLs/SMA1and2 at 2.78%/0.67%/0.10%). Strong operating performance was driven by 15bps QoQ expansion in domestic NIMs to 3.84%,” it said.

The domestic brokerage said that loan growth was well rounded across sectors and management guided for a growth of 12-14.0% going ahead. “SBI reported a strong loan growth of 16% YoY driven by growth across segments: retail and SME at 18% YoY each while corporate at 12.5% YoY,” it said.

Another brokerage Prabhudas Lilladher has also retained “Buy” rating and raised target price to ₹770 from ₹730. “While SBI saw a mixed quarter, management sounded confident about maintaining core profitability driven by 1) good quality growth given stronger underwriting 2) benign asset quality with lower net slippages and multi-year low GNPAs 3) healthy std. asset provision cushion of 80bps which could more than suffice for ECL impact and 4) plough back of profits and creating value without raising capital,” it said in a report.

Among global brokerage houses, JP Morgan and Morgan Stanley assigned an 'overweight' rating with target price of ₹720 and ₹715, respectively. Meanwhile, Citi, CLSA, Jefferies, Goldman Sachs, and Macquarie have assigned “Buy” rating on SBI shares with a target price in the range of ₹695-₹760. 

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