Growth Trajectory Intact Despite Earnings Miss, Analysts Say

State Bank of India’s growth trajectory remains intact even as India’s largest lender delivered some negative surprises in the first quarter, analysts said.

SBI reported a net profit of Rs 6,068 crore for the quarter ended June, down 6.7% year-on-year. That compares with the Rs 8,392-crore consensus estimate. The drop in profit was largely due to mark-to-market losses recorded during the quarter, as the bank had to provide against rising bond yields.

Net interest income improved 12.87% year-on-year to Rs 31,196 crore, while other income fell 80%. Its asset quality remained stable, with gross non-performing asset ratio at 3.91%. But quarterly additions to bad loans rose 180% quarter-on-quarter to Rs 10,115 crore.

Total domestic advances rose 13.66% to Rs 24.5 lakh crore, driven by an improvement in SBI’s retail loan book. Total deposits were up 8.7% year-on-year at Rs 40.45 lakh crore.

Shares of SBI were trading 3% down as of 9:30 a.m. on Monday. Of the 50 analysts tracking the bank, 49 suggest a ‘buy and one recommends a ‘hold’, according to Bloomberg data. The average of the 12-month consensus price target implies an upside of 24.6%.