Analysts remained upbeat on State Bank of India, post Q3 results, despite concerns raised over its ‘marginal’ exposure in Adani group.

The banking behemoth, on Friday (post market hours), reported a whopping 68 per cent growth in Q3-FY23 profit at ₹14,205 crore — the highest ever for a quarter. However, it appears, its exposure towards Adani group has cast aspersions among some investors. But with the Finance Minister and RBI allaying fears of investors, analysts give thumbs up to the stock. Some even advise investors to accumulate the stock on corrections, due to strong balance sheet.

Motilal Oswal, for instance, pointed out that a majority of the loans are for operating assets and projects that have been completed and generating cash. “We maintain Buy,” it said in its report.

Global investment advisors such as JP Morgan, Jefferies and Bernstein have maintained their Overweight, Buy and Outperform ratings on the stock post quarterly results. “SBI held its earnings call, where they provided reasonably detailed update on their Adani exposures, addressing some key investor concerns, in addition to the usual commentary on operating performance,” said Bernstein, while maintaining Outperform rating with target price of ₹700.

The update provided by the bank addresses several key investor concerns and, combined with the rating agencies’ reaffirmation of Adani Group’s credit ratings, would reduce investor concerns around the bank’s exposure to the Adani Group, it added.

‘Correction, an opportunity’

In fact, some like JM Financial an opportunity in the stock price correction! “We believe fears regarding a corporate group exposure are overblown (given exposure is limited to 0.9 per cent of loans) and the recent correction is an opportunity to enter the name,” it said in a recent report. It’s the core banking business that matters to the analysts. The financial services company added that it values the core business at at 1.2x FY25E P/BV, maintaining a Buy recommendation to the stock.

Similarly, Emkay Global raised its earnings estimates for FY23/24 by 11 per cent/4 per cent “on the back of better-than-expected margins/lower treasury drags, and expect the bank to report a decadal-high RoE of 17-17.5 per cent without equity dilution”. It also retained its ‘Buy’ recommendation for the SBI stock.

Religare Broking, too, remained positive on the bank, and expected “total income/operating income/PAT to grow at CAGR of 13 per cent/15 per cent/31 per cent for the period FY22-FY25E. We maintain Buy with a target price of ₹677 (1.3x of FY25E P/ABV),” it said.

However, SBI’s low loan-to-deposit ratio (LDR) offered comfort on incremental loan growth, HDFC Securities isaid. It added that the “best of the credit cycle is now behind. We tweak our FY23E/FY24 estimates to factor in slightly better NIMs and lower credit costs”, maintaining BUY with a revised SOTP-based target price of ₹740 (core bank at 1.4x Sep-24 ABVPS)