SBI, Bank of Baroda touch 52-week high: What are their prospects going forward?

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SBI share price

The shares of the State Bank of India (SBI) and Bank of Baroda (BoB) gained momentum on Monday morning after the banks reported stellar September quarter numbers. 

SBI share price

In 2022, SBI has delivered nearly 30% returns to investors, well above the benchmark index returns. BoB shares have almost doubled investors' capital in 2022 with 87% returns. Let us look at their recent quarter numbers and what analysts say about them.

Bank of Baroda share price

The shares of Bank of Baroda were trading at Rs 156.10, up 8%, while the share of State Bank of India, were trading at Rs 609.65 per share in the early morning hours. Both have touched their 52-weeks high.

Here’s a look at their Q2 earnings, and what analysts have to say. 

State Bank of India Q2 result

SBI reported exceptional numbers for the September quarter - the bank became the most profitable company for the Q2FY23, beating Reliance industries. Let us look at the key numbers:

  • The company reported a net profit of Rs 13,624 crore, a growth of 74% year on year. The profit increased back on health loan growth and improved asset quality. The profit is well above the analysts' expectations.
  • The Net Interest Income (NII) increased 12.83% to Rs 35,183 crore in the September quarter. SBI's interest earned rose 15% to Rs 79,859.59 crore, while interest expense was Rs 44,676.15 crore.
  • The bank reported gross non-performing assets at 3.52% of the total loan book, down from 4.90% a year ago. It is the lowest NPA SBI has reported since FY12.
  • The net NPAs nearly halved to 0.80% of the advances from 1.52% in the year-ago period. 
  • SBI's total advances rose 20% in the September quarter to Rs 30.35 lakh crore. Out of the total, retail loans were at Rs 10.74 lakh crore, up 18.84%, and retail home loans were up 14.57% at Rs 5.94 lakh crore. 
  • Corporate loans grew at 21.2. SME and Agri loans at 13.24% and 11%, respectively.

Bank of Baroda Q2 results:

  • The public sector bank reported a net profit of Rs 3,313.42 for Q2FY23, an increase of 58.7% year on year. 
  • Net Interest Income (NII) rose 34.5% to Rs 10,714 crore for the September quarter.
  • The bank reported a net interest margin of 3.41%, higher than 2.9% in the year-ago period and 3.07% in the previous quarter.
  • Gross NPAs were at 5.31% of the total loan book, down from 8.11% a year ago. On a net basis, bad loans were 1.16% of the loan book, compared with 2.83% a year ago.

SBI share price: Analysts call

Motilal Oswal: It has given a BUY call with a target price of Rs 700 per share. The firm has raised its FY23E/24E EPS by 14%/6% to factor in higher NII and lower provisions even as it models higher employee expenses due to wage revisions. The firm forecasted SBI to report strong earnings progression at 32% CAGR over FY22-24. It estimates an RoA/RoE of 1.0%/17.3% in FY24. 

HDFC Securities: The firm underlined that NIM reflation was sharper than expected at 3.2% and is expected to improve further in the near term. The brokerage firm tweaked its FY23-24 estimates to factor in better NIMs and higher near-term loan growth. It retained the BUY rating with a target price of Rs 700 per share.

ICICIdirect: The brokers at ICICIdirect have to give a target price of Rs 700 per share. According to the firm, key triggers for future price performance are likely to be strong credit growth guidance of 14-16%, steady NIMs with adequate provision buffer, and improving Return on Equity (RoE) trajectory. 

BoB share price: Analysts call

Morgan Stanley: The firm has maintained an OVERWEIGHT stance and has set a target price of Rs 195 per share. They noted that interest income recoveries tend to be volatile and should remain so. Even if adjusted for that, NII growth was 9% QoQ, and 4% above its estimates. Risk reward and valuation look attractive for the bank.

Credit Suisse: The international brokerage firm maintained OUTPERFORM rating with a target price of Rs 180 per share. The results are higher than the firm's estimates. As per the firm, capital levels remain healthy, with CET-1 at ~12%, including profits, and management believes it can sustain growth through internal accruals.

Motilal Oswal: The firm maintained a BUY rating with a target price of Rs 175 per share. Asset quality continues to improve with CE strong at 98%. A lower SMA book and controlled restructuring book provide further comfort. They have increased FY23 earnings by 10%, factoring in higher NII and lower credit cost, and largely maintain their estimates for FY24.

This is not an investment advisory. The blog is for information purposes only. Investments in the securities market are subject to market risks, read all the related documents carefully before investing. Past performance is not indicative of future returns. Please consider your specific investment requirements, risk tolerance, goal, time frame, risk and reward balance, and the cost associated with the investment before choosing a fund, or designing a portfolio that suits your needs. The performance and returns of any investment portfolio can neither be predicted nor guaranteed.