Shares of state-owned lenders State Bank of India (SBI) and Bank of Baroda (BoB) on Monday touched their 52-week highs, respectively, riding on the back of their strong results posted during the second quarter (Q2), which ended September 30.
SBI shares climbed 2.76 per cent to trade at Rs 610.15 by 12:16 pm. The stock touched an intraday high, which is also its 52-week high, of Rs 622.90 today. SBI become the country’s most profitable corporate house, beating Mukesh Ambani-led Reliance Industries, with Rs 14,752 crore of consolidated net income in the Q2 of the financial year 2022-23 (FY23).
SBI’s net profit soared 74 per cent to Rs 13,256 crore in the July-September quarter, making this the best-ever quarterly figures for the bank.
Also Read | SBI Q2 results: Bank says its net profit jumped 74%, net interest income rose 16.8%
On the other hand, BoB zoomed 8.37 per cent to trade at Rs 156.65 by 12:16 pm today. During the day, the stock touched its 52-week high of Rs 161.75. The lender logged a 59 per cent YoY jump in net income at Rs 3,313 crore for the September quarter.
BoB improved its asset quality, with gross non-performing assets (NPAs) falling to 5.31 per cent from 8.11 per cent in the corresponding period a year ago.
Here’s what brokerages opined on the two state-owned lenders’ stocks:
SBI
“State Bank of India has delivered a strong result on the operating and assets quality front. Reported gross slippages stood at Rs 2,400 crore v/s Rs 9,700 crore in the previous quarter. Moreover, the bank has reported the highest-ever quarterly PAT (profit after tax) of Rs 13,200 crore (v/s Rs 6,200 crore in Q1 FY23) on the back of healthy net interest income (Domestic net interest margin: 3.55 per cent) and lower provision (credit cost: 28 basis points),” LKP Securities stated in its report.
The Q2 FY23 calculated ROA (return on assets) and ROE (return on equity) stood at 1.04 per cent and 17.4 per cent respectively; surpassing the ROE target of 15 per cent, it added.
The brokerage recommended a ‘Buy’ on the stock with a target price of Rs 718.
Motilal Oswal Financial Services expected that the bank’s loan growth momentum would continue.
“Loan growth was strong and the bank expects the momentum to continue. A high mix of floating loans, which will benefit from loan re-pricing, will continue to support the NII and overall earnings even as deposit cost could see some increase,” the brokerage said.
It maintained a ‘Buy’ on the stock with a target price of Rs 700.
Nirmal Bang Institutional Equities underlined that SBI registered significant improvement in bad loans.
“Recoveries and upgrades remained flat QoQ at Rs 5,200 crore while total reductions (including write-offs) stood at Rs 8,900 crore vs Rs 8,870 crore in Q1 FY23, leading to net deletions of Rs 6,500 crore. As a result, GNPA/NNPA (Gross non-performing assets/Net non-performing assets) declined to 3.52 per cent/0.8 per cent vs 3.91 per cent/1 per cent in Q1 FY23. All the segments registered improvement in NPAs,” the brokerage said.
It also maintained ‘Buy’ on the stock with a target price of Rs 718.
BoB
“In Q2 FY23, Bank of Baroda (BOB) delivered an expected result on the operating and assets quality front. The fresh slippages were slightly higher at Rs 3,480 crore v/s Rs 3,260 crore in Q1 FY23. Furthermore, the reduction (up-gradation & recovery) stood Rs 10,700 crore v/s Rs 5,800 crore in the previous quarter. The bank has witnessed robust growth in net advances (20.6 per cent YoY, 4.6 per cent QoQ) and deposit growth (13.6 per cent YoY, 5.6 per cent QoQ) with better liquidity position,” LKP Securities said.
The brokerage reiterated ‘Buy’ on the stock with a target price of Rs 202.
Also Read | Bank of Baroda’s net profit in September quarter grew by 58.7% to Rs 3,313 cr
Motilal Oswal said Bank of Baroda’s business growth in the second quarter was healthy at 5 per cent sequentially, led by the RAM (Retail, Agri and MSME) segment and international book.
“Asset quality continues to improve with CE strong at 98 per cent. A lower SMA book and controlled restructuring book provide further comfort. We increase our FY23 earnings by 10 per cent, factoring in higher NII and lower credit cost and largely maintain our estimates for FY24,” the brokerage said.
It reiterated a ‘Buy’ rating on BoB with a target price of Rs 175.
Nuvama Institutional Equities has upped its EPS (earnings per share) estimate on BoB by 24 per cent each for FY23 and FY24 on higher growth and net interest margin (NIM). “BoB is among the few large bank stocks that are still trading below book,” the brokerage said.
It also recommended a ‘Buy’ rating on the stock with a target price of Rs 170.
Further, V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services said that the stellar Q2 numbers from the PSU (public sector unit) banking majors SBI and BoB reinforce the ongoing bullish story in banking.
Rising credit growth, improving asset quality and margins bode well for the banking sector, he added.
Meanwhile, the banking index stayed positive today along with a strong buying interest in state-owned lenders.