State Bank of India reported an unexpected standalone Net Profit of Rs 7325 crore on Saturday 6th August 2022 which was a 7 percent decline in comparison with the same quarter of the last year.
On Monday 8th August 2022, the stock declined by 3.2 percent to Rs 513.85 on NSE with a major gap down. The Dalal Street estimates were missed by a wide margin as treasury losses eroded profitability. Major brokerage firms expected a viable growth but SBIN delivered a drop a drop of 6.7 percent in the consolidated Net Profit.

SBIN is India’s largest lender and they have the biggest portfolio of fixed income securities of which government securities make up for a major portion. The sharp rise in bond yields during the first quarter forced the lender to incur huge losses in their trading books.

Whenever bond yields are on the rise, their prices have to come down. Banks are mandated to mark their investments to current market prices and charge the gains or losses to the profits and loss account which is known as mark-to-market gains or losses.

The mark-to-market punch of Rs 6549 crore dropped SBI’s other income down tremendously to a tiny Rs 2312 crore which was Rs 11802 crore in the previous year quarter. This led to the fall of 33 percent in operating profits to Rs 12753 crore for the first quarter of this year.

Apart from the problems with the treasury, the core performance of SBIN has improved. Net interest income grew by 13 percent to Rs 31196 crore which was backed by a robust 15 percent loan growth and stable margins.

Provisions for bad loans have declined and asset quality has improved. Provisions declined 15 percent to Rs 4268 crore which has aided net profit growth.

Let us look at the Weekly Chart of SBIN:

SBIN Weekly Candlestick Chart on Sharekhan’s Trade Tiger

The stock is unable to breakout above the lifetime high of Rs 549 per share. Owing to the disappointment in the Q1 earnings results, the probability of a breakout is highly difficult.

The MFI was above 70 in the last week and the value is 63.65 on Monday 8th August 2022. Hence the stock is overbought.

By looking at the chart pattern, it is clear that the stock is making a triple top. Hence this is a distribution zone. This is a good time to book profits in the stock holdings and to initiate new short trades for SBIN. 

Disclaimer: We do not endorse you to take trades or investment decisions based upon our posts, all of your trading and investment activities are your own and should be taken through consultation with reputed financial advisors. The analysis posted on this website has been created by involving multiple mediums present over the Internet.

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