SBI Q1 Results Exceed Estimates, Brokerages Remain Bullish Amid Attractive Valuations and Margin Rebound Prospects

SBI Q1 results beat estimates, driven by treasury gains and cost control. Brokerages remain bullish on the lender, citing attractive valuations and the prospect of a margin rebound in H2. SBI share price rose 1.76% to ₹818.75, with many brokerages maintaining their buy ratings and target prices.

State Bank of India (SBI) reported strong first-quarter (Q1) results for FY26, with a net profit of ₹19,160 crore, up 12.5% year-on-year (Y-o-Y) and 2.8% sequentially. The bank's share price rose by 1.76% to ₹818.75 per share on the bourses, with many brokerages maintaining their buy ratings and target prices [1].

Despite sector-wide net interest margin (NIM) headwinds, SBI demonstrated stable core performance. The bank's net interest income (NII) remained broadly flat at ₹41,072 crore, with the domestic NIM slipping to 3.02% from 3.35% a year ago and 3.15% in Q4FY25. However, gains from the investment book and forex income helped offset weaker core interest income [1].

SBI's chairman, C S Setty, acknowledged the pressure on margins due to the repricing of term deposits and customers locking in high rates. He expects relief from September onwards, with NIM returning to the Q4FY25 level of 3.22% by the end of FY26 [1].

The bank's loan growth stayed healthy at 11.6% Y-o-Y, led by a 15% jump in home loans and double-digit expansion in retail credit. Deposits rose 11.7%, though the current account savings account (CASA) ratio dipped to 39.36% from 40.7% a year earlier. Asset quality remained steady, with the gross NPA ratio falling 38 basis points Y-o-Y to 1.83% [1].

Brokerages largely agreed that Q1 demonstrated SBI's ability to deliver stable core performance despite sector-wide NIM headwinds. JM Financial called the quarter "steady," noting that profit was about 15% ahead of its estimates, driven by stronger-than-expected profit before operating profit (PPOP) growth and benign credit costs. It retained a 'Buy' rating with a target price of ₹950 [1].

Nuvama highlighted SBI's relatively modest NIM drop – 10 bps versus steeper declines for peers – and said core NIM was down just 2 bps, the smallest fall in the sector. With a CET-1 ratio of 12.3% after the capital raise, it sees the bank well-positioned for growth and kept its 'Buy' call with a ₹950 target [1].

Analysts broadly expect NIM pressure to persist in Q2FY26 as deposit repricing continues, before easing in the second half. SBI's 12% loan growth guidance for FY26 remains intact, with management planning to accelerate personal loan disbursements during the festive season. Asset quality is forecast to stay resilient, with slippages contained below 0.6-0.7% and credit costs under control [1].

At 0.9–1.2x FY27E adjusted book value, SBI trades at a discount to historical averages, giving brokerages confidence that the risk-reward remains favorable. With capital buffers strengthened, balance sheet quality intact, and a likely pick-up in margins later in the year, the Street sees India's largest lender well-placed to sail through the current interest rate cycle and deliver steady shareholder returns [1].

References:
[1] https://www.business-standard.com/markets/news/sbi-q1-results-bse-sensex-today-nifty-bank-stocks-psu-nim-margin-asset-quality-profit-share-price-indian-equities-125081100141_1.html