The largest public sector lender, State Bank of India (SBI) reported strong growth in Q3 FY2023 in terms of both profitability and interest income, outperforming street estimates. Bank earns highest ever quarterly net profit 14,205 crore 68.47% YoY. The lender’s net interest income (NII) witnessed strong growth due to improved margins, while asset quality improved. SBI share price will be in focus in the coming week after the third quarter.
Q3 PAT increased by 7.09% 13,265 crore in the preceding quarter,
In Q3FY23, Edgestood on the nii 30,687 Crore, registering a growth of 24.31% YoY and 8.46% QoQ. Net Interest Margin (NIM) increased by 29 bps YoY and 14 bps QoQ to 3.69%.
In terms of asset quality, the gross NPA ratio of the bank contracted by 136 bps YoY to 3.14%, while the net NPA ratio declined by 57 bps to 0.77%. Provision coverage ratio (PCR) improved by 490 bps year-on-year to 76.12%.
What should investors know?
According to Gaurav Jani – Research Analyst, Prabhudas Lilladher, SBI’s Q3FY23 earnings led to better NII, while improving asset quality.
Jani said, “NII was strong at Rs.381 billion (PLE Rs.368 billion) led by better margins. NIM was higher at 3.41% (PLE 3.29%) led by faster yield expansion. Loan growth at 18.6% YoY ( PLE was in line at 18.5% while deposit growth stood at 9.5% YoY (PLe 12.3%).
Further, Jani said, “PAT was at Rs 142 billion (PLE 135 billion) led by NII and Treasuries,” adding, “the stock trades at ~1.1x Sep 24 core ABV.”
Meanwhile, Manish Chowdhary, head of research at Stoxbox, said, “State Bank of India reported an all-round stellar performance beating market estimates and showing the strong position of the public sector bank, which got its dues after a long time.” The Bank put in a good performance. Strong performance across all its key parameters, indicating that it holds a strong foothold in the industry and is indeed a market leader.
Furthermore, Choudhary pointed out that the bank has ensured that it is focused on enhancing profitability through effective cost optimization and maintaining strong asset quality. Through its promptness in identifying the risk of default, the bank has ensured that the provisions are recovered within time so that there is no pressure on its asset quality. Although the recent Adani Group fiasco casts doubt on the bank’s asset risk appetite, the bank is confident that it will neither affect the bank’s profitability nor its asset quality.
“With the announcement of huge capex on infra and agriculture by the Government of India in the recent budget, the bank will be one of the biggest contributors to the country’s growth,” said the Stocksbox expert.
SBI shares on Friday 544.45 on the BSE, up 3.12%.
Disclaimer: The views and recommendations given above are of individual analysts or broking companies and not of Mint. We advise investors to do due diligence with certified experts before making any investment decision.
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