SBIN – ROARING GROWTH

State Bank of India, which is our country’s largest lender has shown a fantastic 63 percent surge in Q2 profit. The bank’s net interest income has risen by 17 percent and gross bad loan ratio has fallen to a decade low of 3.5 percent in the September quarter.

Quarterly Earnings Results Walkthrough

State Bank of India reported a consolidated net profit of Rs 15,297 crore for the September quarter, a rise of 63 percent from a year earlier on improved asset quality and healthy loan growth.

The strong increase in quarterly profit results is derived from a healthy core interest income growth borne by a smart increase in credit expansion.

In the September quarter of the previous fiscal year, SBI had made exceptional provision of Rs 7,418 crore towards employee pension costs which had brought down the profits. However, the net profit growth for September quarter in the current year shows a larger increase.

Loan growth of 20 percent year-on-year has upheld core interest income as well as operating profit growth. SBI reported a 17 percent increase in its operating profit for the September quarter. Sequentially, the increase in operating profit was a sharp 66 percent.

The largest Indian lender’s net interest income rose 17 percent to Rs 45,232 crore for the reported quarter, persistence of the improving trend of the previous two quarters. The bank’s interest earned rose 15 percent to Rs 79,859 crore while interest expended was Rs 44,676 crore, which is up from Rs 38,298 crore a year ago.

Brokerage Firms’ Recommendations

ICICI Direct has recommended a buy rating on SBIN with a target price of Rs 700.

Sharekhan has recommended a buy rating on SBIN with a target price of Rs 710.

Motilal Oswal has recommended a buy rating on SBIN with a target price of Rs 700.

Emkay Global Financial has recommended a buy rating on SBIN with a target price of Rs 715.

Technical Analysis

SBIN Weekly Candlestick Chart on Sharekhan’s TradeTiger

SBIN has made a breakout over its distribution zone around Rs 550 and the next target for this stock will be the 261.8% retracement level at Rs 736. Notice the horizontal line in the yellow colour to observe the breakout. The stock will rise further to upper retracement level in the coming months.

MFI is 82 which indicates that the stock is severely overbought. We cannot expect this target to be hit soon as the stock is very expensive. Considering a strong rally, the bank is on a very good track and growth is healthy.

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