SBI a market performer -Karvy Stock Broking

Karvy Stock Broking in its January 28, 2010 research report has recommended a market performer rating on the stock State Bank of India, SBI with a target price of Rs 2155.

It further said that, in Q3FY10, State Bank of India’s net interest income grew by 9.7% (Y/Y) to Rs 63.2 billion higher than our estimates (of Rs 59.2 billion) by almost 6.8% mainly due to better liability-side management. In the quarter, SBI’s operating profit went up by merely 3.0% (Y/Y) to Rs46.2 bn mainly due to much higher provisions for wage revision; during the quarter the bank made provisions for wage revision of Rs4.83 bn and Rs900 mn for new branches and installations of ATM. On account of new employees recruited during Q4FY09, the bank reported additional expenses of Rs1.01 bn. SBI’s operating profit higher than our expectation (of Rs44.6 bn) on the back of marginally better NII and robust performance in core fee income and forex gains. SBI’s reported net profit remained flat at Rs24.8 bn compared to our estimates of Rs 24.85 billion.

Overall the quarterly result was better than our estimates on NII and operating profit level though on net profit level the bank’s performance was in-line. We revise our earning estimates upward for FY10 and FY11 by 10.2% and 6.2% to factor in higher margin, strong traction in fee income and higher treasury income; we increase our target price by 8.7% to Rs 2,155 and upgrade the stock to Market Performer rating.

Source:  Moneycontrol.