State Bank of India (SBI) saw a muted performance in its share price today following the release of its Q2 FY25 earnings report. Investors assessed the results, leading to modest market movement despite SBI's strong financials and growth trajectory. Here's a detailed look at SBI's Q2 performance, brokerages' reactions, and the outlook for SBI shares for those looking to buy shares online.
SBI Q2 performance review: Profits and steady growth
In the July-September quarter, SBI posted a net profit of ₹18,331 crore, up by an impressive 28% year-on-year, surpassing most analyst expectations. This profit increase was driven by strong treasury income, improved recoveries on written-off loans, and a reduction in operating expenses. However, the bank's net interest margin (NIM) declined slightly, down by 8 basis points (bps) from the previous quarter, now standing at 3.14%.
Despite this dip, analysts maintain a positive outlook for SBI's NIM, particularly in light of a recent 30-bps hike in the one-year Marginal Cost of Funds Lending Rate (MCLR), which should support interest income going forward.
Loan and deposit growth: A robust sector leader
SBI achieved notable loan growth, up 15% year-on-year, positioning itself as one of the sector's top performers. Deposits also grew, rising by 9% Y-o-Y and 4% on a quarterly basis. The bank's focus on current account and savings account (CASA) growth helped support these figures. Even with strong loan expansion, SBI's loan-to-deposit ratio remains manageable, alleviating concerns over liquidity and enabling a steady path for investors to consider buying shares online.
Brokerages' take: Holding target prices steady
Following the Q2 results, several brokerages reiterated their target price for SBI shares, seeing their growth potential as balanced against the sector's current challenges. Brokerages find SBI’s valuation attractive. It has a price-to-book value of 1.1 times and a price-to-earnings ratio of 7, based on estimates for FY26.
This is appealing, especially because SBI is expected to have a return on equity (RoE) of 16-19% from FY25 to FY27. Given these factors, many experts recommend holding SBI shares, with prospects to buy shares online as a feasible investment option in the current market.
Asset quality and outlook
SBI's asset quality remained strong in Q2, with gross and net non-performing asset (NPA) ratios declining to 2.1% and 0.5%, respectively. The bank's retail loan book continues to demonstrate resilience, with most loans extended to salaried individuals and captive customers, reducing risks associated with non-payment.
Management has projected a 14-16% loan growth for FY25, alongside double-digit deposit growth and a stable NIM, even if the Reserve Bank of India (RBI) reduces the repo rate. This stability reinforces SBI's ability to maintain its market position and appeal to investors looking to buy shares online.
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