Posted on February 7, 2025, by Niftynews
State Bank of India (SBI shares), the country’s largest public sector bank, has posted a mixed set of results for Q3FY25. While the bank’s profitability was boosted by lower provisions, its margins moderated, and other income fell short of analyst estimates due to weaker treasury income. Despite this, analysts have maintained a positive outlook for the SBI share price, with some setting revised target prices, suggesting potential upside in the coming months.
Q3FY25 Earnings: Mixed Performance
SBI Q3 earnings showed an 84% year-on-year growth in profit, driven primarily by the reversal of provisions for standard assets. However, the growth was tempered by lower treasury income and softer margins, which impacted the overall performance. The bank reported net interest income (NII) growth of 4%, but weaker treasury gains and soft margins weighed down the results.
Analysts from HDFC Institutional Equities highlighted that the SBI Q3 results missed estimates due to lower mark-to-market (MTM) gains, but strong operational performance and the reversal of provisions provided some offset. As a result, SBI share price came under pressure, with a slight reduction in target prices from brokerage firms.
Credit Growth and Asset Quality: A Positive Trend
SBI loan book grew by 13.8% YoY, reflecting healthy demand across various segments. However, growth in its Xpress Credit portfolio, which offers unsecured loans, saw a further deceleration. The bank’s deposit growth remained modest, and its CASA (Current Account Savings Account) ratio dipped to 37.6%, indicating weaker traction in savings account balances.
On the positive side, asset quality improved further. The bank reported lower slippages and a reduction in its Special Mention Account (SMA) balances. SBI restructured book remained under control at just 0.34% of advances, reflecting improved underwriting standards and better risk management. This improvement in SBI asset quality has contributed positively to investor sentiment, keeping the stock relatively stable.
Analysts Targets and Recommendations for SBI Shares
Despite the mixed Q3 results, analysts remain optimistic about SBI shares. HDFC Institutional Equities reiterated its ‘Buy’ rating on SBI shares with a revised target price of Rs 1,050, down from Rs 1,100, citing softer treasury income offset by strong operational performance. The brokerage also highlighted the bank’s healthy loan growth and improved asset quality.
Nirmal Bang Institutional Equities also maintained a positive stance on SBI shares, with a target price of Rs 1,016, down from Rs 1,055 earlier. The analysts valued SBI’s standalone business at 1.4 times its December 2026 estimated Adjusted Book Value (ABV). The revised target incorporates a slight premium to the bank’s five-year average multiple of 1.3 times ABV, reflecting SBI’s leadership position in both corporate and retail banking sectors.
Outlook for SBI: Loan Growth and Net Interest Margin Expectations
Looking forward, SBI has guided for net interest margins (NIM) to remain above 3% in FY25. The bank expects loan growth to be in the range of 14–16% for FY25, with a rebound in its Xpress Credit portfolio and a double-digit deposit growth. The bank also remains confident of maintaining an RoA (Return on Assets) of at least 1% for the fiscal year.
SBI’s management has emphasized the importance of keeping its NIM stable, focusing on strong credit growth while improving operational efficiency. The bank’s ability to manage its asset quality, boost its deposit base, and maintain healthy loan growth is expected to play a crucial role in driving future profitability.
Conclusion: A Buy Opportunity for SBI Shares?
Despite mixed Q3 results, the overall outlook for SBI shares remains positive. Analysts continue to expect healthy credit growth, stable margins, and strong operational performance in the upcoming quarters. The SBI share price may face some volatility in the short term, but the long-term outlook for the bank remains strong, supported by its robust market position and positive guidance for FY25.
For investors, SBI shares could present a buy opportunity at the current levels, with a potential upside once credit growth rebounds and the bank’s operational improvements materialize. Keep an eye on the revised target prices, as several brokerages suggest a positive outlook for the stock, with revised targets in the range of Rs 925 to Rs 1,050
