SBI rallies over 6% after strong earnings with analysts pegging it to be the first to recover among public sector banks

• State Bank of India’s (SBI) share price is up by 6% after its second-quarter earnings showed a 52% jump in profit.
• It’s currently the most active stock on the market today, along with being one of the top gainers.
• Most brokerages have upgraded their outlook and target prices.

The share price of India’s largest public-sector lender, the State Bank of India (SBI), is up by over 6% after the bank reported a 52% jump in its profits yesterday during its second-quarter earnings. “SBI reported a healthy performance in a challenging environment,” noted Motilal Oswal Securities.



Not only is SBI’s stock one of the most active on the market today, but it’s also the top gainer so far. In addition to its profit beating market estimates, the rally in the bank’s stock price is also partially a function of its expectations on the slippages front.

“Clarification on overall stress at 2.5% of loans and Covid-19 provisions building up, the hangover of uncertainty is abating,” said ICICI Direct Securities in its review. The brokerage also pointed out that the SBI’s customer portfolio, which consists mostly of salaried and government employees, may be more resilient in paying back loans amid the pandemic.


Analysts bullish on SBI
Source: Respective review reports

Not everyone believes that SBI will be able to keep its spillages that low. “While we expect stress loans to be higher than guidance and view the low COVID provisions as a negative, we recommend Buy as we see little downside from the current valuation,” said Elara Capital in its review.

Yet, most brokerages agree on one thing. SBI’s remains the best bet for recovery among public sector banks with a healthy provision coverage ratio of 71%, robust capitalisation, and improved core operating profit.

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