Shares of State Bank of India (SBI) saw a 2% increase in Wednesday's trading session, reaching a high of Rs 987.75. This surge followed the public sector lender's Q2 results, which elicited a range of reactions and target price revisions from leading brokerages.
Brokerage Assessments Post-Q2 Earnings
Several prominent financial institutions, including HSBC, UBS, Jefferies, Citi, and Macquarie, weighed in on SBI's performance, offering updated ratings and price targets. While some maintained a positive outlook, others noted areas of concern, leading to adjusted projections.
HSBC's View on SBI
HSBC maintained its 'Buy' rating for SBI but slightly reduced its target price to Rs 1,220 from Rs 1,310. The brokerage characterized the quarter as a "mixed performance" but affirmed a "sanguine outlook." HSBC highlighted a 5% quarter-on-quarter growth in net interest income (NII), which surpassed its estimates by 4%, driven by an 11-basis-point expansion in the domestic net interest margin (NIM) to 3.11%. HSBC also raised its earnings per share (EPS) estimates for FY27-FY29 by 4-8%, citing strong NIM momentum and operating leverage, despite factoring in slower loan growth for some subsidiaries.
Jefferies' Positive Outlook
Jefferies reiterated its 'Buy' rating on SBI, setting an optimistic target price of Rs 1,320. The brokerage stated that the bank’s "core performance" exceeded what the reported numbers suggested, solidifying SBI's position among its top picks. Jefferies anticipates a compound annual growth rate (CAGR) of 14% for core profit over FY26–FY29, projecting a return on assets (RoA) of 1% and a return on equity (RoE) of 15% by FY28. Strong asset quality was also a key highlight for Jefferies.
UBS Flags Concerns
In contrast, UBS maintained a 'Neutral' rating and lowered its 12-month target price for SBI to Rs 1,100 from Rs 1,190. UBS pointed out that the 18.2% year-on-year (YoY) loan growth fell below expectations, despite improvements in margins. The brokerage also noted a 3% shortfall in pre-provision operating profit (PPOP), primarily attributed to higher operating expenses. UBS observed that the reported profit was bolstered by a one-time gain from a stake sale in SBI Mutual Fund, partially offset by treasury losses, suggesting that the stock's current valuation might limit further upside.
Citi's Assessment of NIMs and Asset Quality
Citi upheld its 'Buy' rating on SBI with a target price of Rs 1,300. Its report emphasized "NIMs surprise, growth steady, asset quality clean." Citi noted a 14% YoY increase in NII, with NIM expanding by 8 basis points sequentially to 2.94%. The brokerage also highlighted that 49% of SBI's loans are linked to external benchmarks, which could provide support for margins in a rising-rate environment. Citi praised the improving asset quality, with slippages below 0.5% and credit costs below 0.35%. The estimated one-time impact of the expected credit loss framework was around Rs 19,500 crore, or 3.3% of net worth.
Macquarie's Resilient Performance View
Macquarie maintained its 'Outperform' rating on SBI, retaining a target price of Rs 1,220. The brokerage affirmed that "core profitability [remains] intact," citing healthy loan growth, resilient margins, and stable asset quality. Macquarie also deemed the impact of the expected credit loss (ECL) transition as manageable, reinforcing its view of the bank's underlying performance resilience.