State Bank of India shares rise following strong second quarter earnings

Shares of State Bank of India gained nearly two percent after the bank reported its latest quarterly earnings. The stock traded up 1.96 percent at Rs 998.15 on the NSE at 12:35 pm.

Earnings Growth

Standalone net profit increased by 14.3 percent year-on-year to reach Rs 23,038 crore for the quarter. Net interest income went up 14.7 percent to Rs 49,143 crore, and the net interest margin improved to 3.1 percent. Loan loss provisions dropped 33 percent to Rs 2,759 crore due to better asset quality. Operating profit grew by a modest 7.3 percent to Rs 34,226 crore because other income fell by 24 percent to Rs 11,777 crore. Bank chairman CS Setty stated that the lender expects 10 to 11 percent deposit growth and 14 to 15 percent credit growth for the financial year. He added that the bank holds a corporate loan pipeline of Rs 7.8 lakh crore and has no immediate plan to raise deposit rates.

Brokerage Outlook

Nomura kept a neutral rating on the bank while lowering its target price to Rs 1,100 from Rs 1,160. The brokerage noted that higher operating expenses and treasury losses offset the strong net interest income. Adjusted profit after tax reached Rs 170 billion, which was seven percent below Nomura estimates. The treasury book recorded a loss of Rs 12.8 billion. According to bfsi.economictimes.indiatimes.com, domestic net interest margin rose 11 basis points sequentially to 3.11 percent, while advances grew 18.2 percent year-on-year.

Context

Quarterly financial earnings reports help investors understand the business health and profit growth of major banking institutions. Large lenders track metrics like net interest income and loan provisions to measure their overall lending performance in the market.