SBI Shares Slip Despite Q1 Beat; Brokerages See Up To 21% Upside

State Bank of India (SBI) shares surrendered their early gains and fell more than 1% on Monday, even as brokerages remained bullish after the lender reported better-than-expected June quarter earnings. Analysts pointed to improving margins, robust loan growth and stable asset quality, although investors appeared to book profits following the recent run-up in the stock.

SBI shares were trading at ₹1,085.10 apiece in early trade, down 1.1%, making the stock the top loser on the Nifty 50. The stock had initially risen as much as 1.2% before reversing course. It had gained 1.1% on Friday after the bank announced its Q1FY27 results.

Brokerages Raise Target Prices

CLSA maintained its 'Outperform' rating on SBI and raised its target price to ₹1,325 per share, implying an upside of around 21% from Friday's closing price. The brokerage described the June quarter as a healthy all-round performance, with domestic net interest margin (NIM) expanding seven basis points sequentially, in line with the bank's full-year guidance.

According to CLSA, net interest income (NII) exceeded its estimates by 2%, while higher fee income and lower operating expenses helped core pre-provision operating profit (PPoP) beat expectations by 12%. Loan growth remained strong at 18-19% year-on-year across segments.

The brokerage also highlighted improving asset quality, with gross and net slippages declining by around 20 basis points year-on-year and the slippage ratio touching its lowest first-quarter level in several years. It raised its FY27-FY29 profit estimates by 2-6%, driven by higher NII and lower provisions.

HSBC retained its 'Buy' rating and increased its target price to ₹1,310 per share. It said the quarter delivered an all-round beat, supported by stronger margins, higher core fee income, controlled operating expenses and stable credit costs. The brokerage raised its FY27-FY29 earnings per share estimates by 9-14% on expectations of sustained margin momentum and better cost management.

Bernstein maintained a 'Market Perform' rating with a target price of ₹1,300 per share, saying SBI delivered a broadly steady quarter supported by healthy loan growth, improving margins and stable asset quality.

However, it flagged relatively modest deposit growth of 10% year-on-year, which pushed up the bank's loan-to-deposit ratio. While slippages increased seasonally, stronger recoveries and upgrades helped keep credit costs under control, the brokerage added.

Q1 earnings beat estimates

SBI reported a net profit of ₹21,121 crore for the June quarter, up 10.2% year-on-year.

Net interest income rose 15% year-on-year to ₹46,992 crore, surpassing the poll estimate of ₹45,800 crore. Asset quality also improved, with the gross NPA ratio easing to 1.47% from 1.49% in the previous quarter, while the net NPA ratio declined further.