SBI trades flat as slippages zoom in Q2; should you buy the stock now? Read on

SBI shares, SBI Q2 Results: For the reporting quarter, the bank posted a profit of Rs 14,330 crore, up 8 per cent year-on-year (YoY). In the corresponding quarter of the previous fiscal, the bank’s profit stood at Rs 13,265 crore.

All in all, global brokerages have retained their previous rating on the counter with Goldman Sachs revising the target price lower and Jefferies increasing it further.

SBI shares, SBI Q2 Results: Shares of State Bank of India in early morning deals on Monday (November 6) after opening 0.87 per cent higher at Rs 583 traded in the red even after the lender posted a better-than-expected bottom line for the quarter ended September 30. Shares of the state-run bank ended over 1 per cent higher at Rs 578.15 ahead of its Q2 results last Friday.

For the reporting quarter, the bank posted a profit of Rs 14,330 crore, up 8 per cent year-on-year (YoY). In the corresponding quarter of the previous fiscal, the bank’s profit stood at Rs 13,265 crore.

The net interest income (NII) at the lender also gained YoY by 12.3 per cent to Rs 39500 crore versus Rs 31,184 crore posted in the corresponding quarter of the previous fiscal.

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Operating profit at the lender fell 8.07 per cent on year for the period under review to Rs 19,417 crore. The net interest margin also slipped by 12 basis points to 3.43% in the reporting quarter.

Asset quality for the lender showed an improvement with the gross non-performing asset ratio declining 21 basis points to 2.55 per cent sequentially. The net NPA ratio, too, fell to 0.64 per cent as compared to 0.71 per cent as of June 30.

The credit offtake at the lender also logged around 12.39 per cent YoY growth with robust growth across all segments. Foreign Office advances crossed Rs 5 lakh crores.

Higher slippages during the quarter- a concern

Fresh slippages at the bank during the September quarter were reported at Rs 3831 crore, while the gross slippages amounted to Rs 4081 crore. Loan write-offs by the lender stood at Rs 4420 crore as of September 30.

Provisions reduced sharply by 96 per cent YoY to Rs 115.3 crore. The PCR or provision coverage ratio fell 248 basis points on year to 75.45 per cent as of September 30. The bank provided Rs 33,794 crore for non-NPA provisions.

Brokerages’ view on SBI post Q2 performance

All in all, global brokerages have retained their previous rating on the counter with Goldman Sachs revising the target price lower and Jefferies increasing it further. Here’s listed the global brokerages’ take on the stock post the lender's better-than-expected Q2 show.

State Bank of India (CMP: 578)
Brokerage	Rating	New Target	Old Target
CLSA	Buy	700
JP Morgan	Overweight	725	720
Goldman Sachs	Buy	710	746
Jefferies	Buy	780	760
Macquarie	Outperform	720

CLSA maintained a ‘buy’ rating on the lender with a target of Rs 700, implying an over 21 per cent potential upside from the last close. For the global brokerage, the lender’s performance was largely on track on most parameters, with NIM moderation a slight surprise. The brokerage highlighted that retail loan growth during the quarter moderated over the high base. Further, while the asset quality at the lender continued to show improvement, CASA remains challenging.

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