- State Bank of India reported strong loan growth and steady asset quality in Q3 earnings
- Brokerages showed mixed views on SBI’s valuation and deposit growth sustainability
- Jefferies and Kotak maintained Buy ratings with raised price targets, Bernstein was cautious
State Bank of India's December-quarter performance drew broadly positive commentary from brokerages, with strong loan growth, steady asset quality and improving margins underpinning the beat. However, views diverged on valuation comfort and the sustainability of deposit momentum, keeping consensus recommendations mixed.
The lender reported robust profit growth, aided by healthy operating performance, controlled credit costs and strong traction across retail, SME and corporate loans. System-beating loan growth remained a key highlight, even as deposit growth continued to lag advances, pushing the loan-to-deposit ratio higher.
Buy Camp Sees Upside, Others Flag Valuation
Among brokerages, Jefferies retained a bullish stance, reiterating a Buy and raising estimates, citing SBI's superior loan growth, resilient margins and improving asset quality. Jefferies hiked its price target of Rs 1,300, and in its long-term framework outlined an upside scenario of Rs 1,380 against a downside of Rs 960, highlighting favourable risk-reward.
In contrast, Bernstein remained more cautious with a Market-Perform rating and a price target of Rs 1,100, pointing to rich valuations after the recent run-up despite strong operating metrics.
Kotak Institutional Equities stayed constructive, maintaining a Buy and revising fair value to Rs 1,250, arguing that execution consistency, controlled costs and improving return ratios justify a premium valuation, though further re-rating may be gradual.
ALSO READ: SBI Raises Its Credit Growth Guidance To 14-15% For FY26 Up From 12-13%
Loan Growth Stands Out, NII Momentum Solid
Brokerages broadly agreed that SBI's loan growth — running in the mid-teens year-on-year — was among the strongest in the large-bank universe. Retail advances and SME loans led growth, while corporate credit demand also showed signs of acceleration. This translated into solid net interest income expansion, even as net interest margins stayed broadly stable sequentially.
Non-interest income offered additional support, with recoveries and fee income helping offset modest pressure from funding costs. Several analysts noted that SBI continues to outperform peers on NII growth, reflecting scale advantages and improving balance-sheet mix.
Asset Quality Comfort Improves Further
Asset quality trends remained reassuring, with slippages contained and credit costs trending lower. Gross and net NPAs improved sequentially, aided by recoveries and upgrades, while provision coverage stayed comfortable. Analysts flagged that stress in unsecured and SME segments remains manageable, with agri stress still higher than the overall book but largely anticipated.
Lower credit costs were a key earnings lever during the quarter, reinforcing confidence that SBI's underwriting discipline has improved meaningfully compared to prior cycles.
ALSO READ: SBI Q3 Results: Net Profit Soars 24.5%, NII Up 9% YoY; Asset Quality Improves
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