Shares of State Bank of India (SBI) gained more than 2.2% during early trading on Monday after the country’s largest lender reported better-than-expected June quarter earnings.
The stock opened at Rs 817.30 following the announcement of a 12% year-on-year increase in standalone net profit to Rs 19,160 crore in Q1FY26, surpassing analyst estimates of Rs 17,095 crore.
The performance was aided by strong treasury gains and retail loan growth, while management guidance on stable asset quality and margins added to investor optimism.
Analysts said the bank’s results reinforced expectations of steady performance in the current financial year despite pressure from lower interest rates.
Earnings supported by treasury gains and retail lending
Interest income rose 6% to Rs 1,17,996 crore from Rs 1,11,526 crore a year earlier.
The quarter saw significant gains from the sale of government securities, supported by cumulative policy rate cuts of 75 basis points.
Higher foreign exchange trading income also contributed to the improved non-interest income.
Pre-tax profit exceeded Street estimates by 32%, driven by core pre-provision operating profit and benign credit costs, according to CLSA.
However, net interest margin (NIM) slipped to 3.02% from 3.35% a year earlier as returns on domestic advances declined and deposit costs remained high.
At the end of FY25, SBI’s NIM stood at 3.22%, underscoring the margin compression trend.
The bank, which accounts for nearly one-fifth of outstanding bank credit in India, remains a bellwether for the sector’s health.
Brokerages raise targets, maintain positive stance
HSBC maintained a buy rating with a target price of Rs 960, citing the bank’s potential for healthy loan growth while safeguarding margins.
Jefferies also kept a buy call, setting a target of Rs 970, pointing to the management’s retained RoA guidance of 1% and domestic NIM of 3%.
CLSA was similarly optimistic, raising its target to Rs 1,050 on the back of stable asset quality and strong operating performance.
Avendus upgraded the stock to buy from add, lifting its target to Rs 938 from Rs 852.
The brokerage expects faster-than-system growth, other income drivers, and operating expense controls to offset further NIM compression from rate cuts.
Avendus projects FY26 NIM at 2.7% and slippages at 0.7%, with RoA and RoE expected to moderate to 1.0% and 15.1% respectively in FY26 from 1.1% and 18.6% in FY25.
Earnings CAGR is forecast at 4.3% over FY25–27, with core adjusted book value CAGR at 17.3%.
Some brokerages advise caution
UBS adopted a more cautious approach, retaining a neutral rating with a target of Rs 880.
It noted modest business growth and a 70-basis-point decline in the loan-to-deposit ratio quarter-on-quarter.
Bernstein maintained a market perform rating with a target of Rs 800, flagging margin erosion despite gains from recoveries and treasury operations.
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