Most brokerages were optimistic about State Bank of India (SBI) after its first-quarter earnings beat street expectations, with analysts honing in on strong loan growth, stable asset quality and effective cost management.

What Happened: India’s largest public sector lender reported a nearly 1% year-on-year rise in net profit to ₹17,035.16 crore in the first quarter, beating analyst estimates. Its net interest income for the quarter grew 5.7% year-on-year to ₹41,125 crore.

The lender's net interest margin, a key profitability metric, shrank to 3.22%, down 11 basis points from the 3.33% that the bank posted in the first quarter a year ago.

Analyst Reactions: CLSA has an “outperform” rating on SBI, raising its target price to ₹1,075 per share, noting that SBI’s Q1 results showcased healthy loan growth, although deposit growth lagged.

It said net interest margin (NIM) remained largely stable, and asset quality was intact. While credit costs increased, they were still below the run-rate levels, according to CLSA.

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Investec was also bullish on SBI with a “buy” rating and a target price of ₹880 per share. Despite a miss on NIMs and weaker NII growth, the bank managed to control operating expenses, delivering a healthy return on assets (RoA) in a seasonally weak quarter, the brokerage said, adding that it expects strong year-on-year credit growth of 15% for FY25, noting that SBI has enough liquidity buffers.

JPMorgan had an “overweight” rating with a target price of ₹1,000 per share, highlighting that SBI’s gross advances grew 15% year-on-year across segments, and operating expenses growth moderated sharply with wage revision provisions behind.

The bank’s asset quality was stable, with net slippages at 54 basis points and loan-related provisions around 50 basis points, the brokerage said. It noted that SBI’s Q1 return on asset was 1.1%, with expectations that it will stay above 1%, given benign credit costs and operating expenses flexibility.

Conversely, UBS has a “sell” rating on SBI with a target price of ₹725 per share. UBS expects the current return on assets of over 1% to decrease as credit costs rise.

The research firm also mentioned that the relatively lower core pre-provision operating profit (PpOP) to assets and low counter-cyclical buffers leave little cushion for current profitability. However, management remains confident about the asset quality of the unsecured retail segment.

Price Action: SBI’s share price was down 2.33% at ₹828.10 in early trade on Monday amid a broad-based downturn in markets as fears of a recession in the US weigh on investor sentiment.

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