SBI Q4 Results Review: Lower Opex, Healthy Other Income To Boost Earnings

The State Bank of India is expected to benefit from lower operating expenses, higher treasury gains and healthy fee income in FY25, according to analysts.

India's largest public sector bank posted a 24% year-on-year rise in its standalone net profit at Rs 20,968 crore during the quarter ended March 2024, according to an exchange filing. Analysts polled by Bloomberg estimated a net profit of Rs 12,340 crore for the quarter.

The rise in the bottom line was due to healthy growth in other incomes and lower provisioning during Q4. Further, a significantly lower impact of wage revisions during the quarter at Rs 670 crore, as against expectations of Rs 5,400 crore, also propelled net profit for the reporting quarter, according to Citi Research analysts.

Net interest income, or core income, rose 3% year-on-year to Rs 41,655 crore in the January–March quarter. In Q4, the bank reported a 24.4% year-on-year rise in other income to Rs 17,369 crore.

"Few one-offs boost PAT above estimate: Rs 5,000 crore of miscellaneous income; Rs 3,500 crore of revaluation/profit from sale of investments; Rs 1,300 crore of interest on IT refund; and Rs 350 crore/Rs 1,300 crore of standard asset/other provisions reversals," Citi said in its post-earnings note.

Following are some of the brokerages' views on the SBI Q4 results:

Citi Research

• Revised earnings by 9% for FY25 and FY26 on lower credit costs while retaining core pre-provisioning operating profit estimates.

• See return on assets at 1% and return on earnings at 15–16% over FY25 and FY26.

• Maintain 'Sell' with a revised target price of Rs 705 apiece.

Nomura Global Markets Research

• Cuts credit cost estimates to 0.4% over FY25 and FY26, compared with 0.55% earlier.

• Higher core fees drive about a 15% hike in earnings per share over FY25 and FY26. See return on assets at 1% and return on earnings at 17–18%.

• Expect loan growth to reach 14%.

• Reiterate the 'Buy' rating with a revised target price of Rs 1,000 apiece, implying 22% upside.

• The cost-to-assets ratio is seen at 1.8% over FY25 and FY26, up from 2% in FY24.

Nuvama Institutional Equities

• Raised earnings per share estimate by 14% for FY25, and 12% for FY26 to factor in higher growth and NIM.

• Return on assets likely to stay above 1% and return on earnings of 17% through FY26.

• Reiterated 'buy' rating with revised target price of Rs 950 per share.

• Expects SBI to outperform, given a low loan-deposit ratio, stable asset quality, write-back of 50 basis points to CET-1 from new investment norms and strong outlook.

DART Research

• Revised earnings estimate by 4-5% for FY25 and FY26, mainly led by higher growth assumptions.

• Maintained ‘accumulate' rating with target price of Rs 865 apiece, from Rs 820 earlier.

• NIM to remain at 3.3% for FY25 and FY26, similar to FY24 levels.

• Credit costs seen at 60 bps over FY25 and FY26, assuming 1% slippages and lower prospects of incremental provision reversals.