Global brokerages see up to 58% upside in SBI post Q3 results

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Analysts have revised their target price upward on State Bank of India (SBI) after the public sector lender on Thursday posted better-than-expected financial results for the quarter ended December 31.

Global brokerage firm CLSA sees 58% upside in State Bank of India from the previous close of Rs 355.10.

“SBI’s Q3FY21 performance was much better than expected, with gross slippages of just Rs 2,500 crore (<0.1% of loans) which is the best among banks under our coverage that have reported and now full-year slippages of 1.5% of loans is the lowest the bank would have seen in the last 15 years,” CLSA said in a report.

The scrip on Friday traded 12.94% up at Rs 401.05 at around 9.44 am (IST), while the benchmark BSE Sensex was up 354.94 points, or 0.70% at 50,969.

The bank reported around 7% drop in its standalone net profit at Rs 5,196.22 crore for the third quarter ended December. The bank had posted a net profit of Rs 5,583.36 crore for the corresponding quarter last year.

The bank’s asset quality improved substantially as the gross non-performing assets fell to 4.77% of the gross advances as of December 31, 2020 from 6.94% in the corresponding period a year ago. In value terms, the gross NPAs or bad loans stood at Rs 1,17,244.23 crore, as against Rs 1,59,661.19 crore.

Another global brokerage firm Macquarie also revised the target price upward by 25% to Rs 450.

“SBI’s Q3FY21 asset quality performance was very strong, as seen in its much lower slippages, fewer restructured assets, stable margins and improving ROA. We have increased confidence in SBI’s asset quality and balance sheet and hence believe SBI is on track to hit its target 1% ROA as credit costs normalise,” Macquarie said.