Stock Markets Analysis & Opinion

SBI Impresses in Q4: Strong Profit Growth Leads to Revised Valuation

State Bank of India (NS:SBI), India's largest state-owned lender, has reported impressive financial results for the fourth quarter of the fiscal year 2023-24 (FY24), surpassing market expectations. In Q4FY24, SBI witnessed a substantial 24% year-on-year (YoY) surge in net profit, reaching INR 20,698 crore, outperforming analysts' estimates of INR 13,692 crore. This robust performance underscores the bank's resilience and effective management strategies amid evolving market dynamics.

Moreover, SBI's net interest income (NII) for Q4FY24 saw a slight increase of 3.1% YoY, totaling INR 41,656 crore, surpassing market expectations of INR 40,920 crore. However, the domestic net interest margin (NIM) experienced a YoY decline to 3.47% from 3.84%, reflecting ongoing market challenges and competitive pressures.

Additionally, SBI demonstrated improvement in asset quality during the quarter, with Gross Non-Performing Assets (NPA) reducing by 2.9% to INR 84,276.33 crore in Q4FY24. The Gross NPA ratio fell by 18 basis points to 2.24%, while the Net NPA ratio declined by 7 bps to 0.57%, sequentially. These improvements indicate the bank's proactive measures to address asset quality concerns and mitigate risks.

The Central Board of SBI declared a dividend of INR 13.70 per equity share (1,370%) for FY24, highlighting the bank's commitment to enhancing shareholder value. The dividend record date is set for May 22, with the payment scheduled for June 5, 2024, offering investors a steady income stream amidst volatile market conditions.

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Furthermore, SBI's loan growth remained robust, with credit expanding at 15.24% YoY, reaching INR 37,67,535 crore by the end of March 2024. Total deposits grew by 11.13% YoY to INR 49,16,077 crore, with the CASA ratio standing at 41.11%. These figures underscore SBI's strong customer base and its ability to attract deposits and deploy funds effectively.

SBI's strong performance in Q4FY24 reflects its resilient business model and effective risk management practices which have consequently revised the SBI’s fair value to INR 955 per share, the highest so far. Prior to the result, the fair value was INR 898 The stock is trading near an all-time high, and even from here, there seems to be a good upside of 15.7%.


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