Strong NII, Improving Margins Boost Analyst Optimism on SBI Shares After Q2

SBI’s Core Income Strength Keeps Analysts Constructive After Q2

Stronger-than-expected interest income and wider margins offset a treasury loss and a one-off gain in the headline profit figure.

Core income offers the clearest support

SBI reported Q2 FY27 profit of ₹23,040 crore, up 14.3% year on year. That headline included a one-off gain of ₹7,300 crore from the divestment of SBI Mutual Fund. Excluding the gain, profit after tax was about ₹17,000 crore, according to Antique Stock Broking—around 15% below its estimate.

The adjusted figure was affected by a ₹1,300 crore treasury loss and operating expenses brought forward to support a more balanced cost trajectory through the year. Pre-provision operating profit remained steady. For investors, the distinction matters: the one-off gain lifted reported earnings, while net interest income and margins offer a clearer read on recurring banking performance.

Net interest income rose 14% to ₹49,140 crore, beating Motilal Oswal Financial Services’ estimate by 3%. Net interest margin expanded eight basis points sequentially to 2.94%, ahead of the 2.83% estimate. SBI maintained its guidance for domestic NIM to exceed 3% in FY27.

Growth and funding will shape the next test

The loan book grew 18% year on year, while deposits increased 12%, aided by $10.9 billion of FCNR(B) deposits. The gap between the two growth rates makes deposit mobilisation an important metric to watch alongside lending. The figures show strong credit expansion, but do not by themselves establish how readily that pace can be funded over time.

Analysts also pointed to slower loan growth than peers and treasury volatility as risks to the outlook. Antique raised its FY27 and FY28 net interest income estimates by 3%, citing better margins and factoring in 50 basis points of rate hikes, but reduced its other-income estimates because of lower expected treasury gains. Those rate assumptions are brokerage estimates, not a change in SBI’s stated guidance.

Brokerages see upside, with differing assumptions

Antique maintained a Buy rating but cut its target price to ₹1,155 from ₹1,255, revising earnings estimates by +2% for FY27, unchanged for FY28 and down 5% for FY29. Jefferies called SBI its top sector pick, citing a 13% CET-1 capital adequacy ratio, healthy returns on equity and potential to monetise stakes in businesses. It raised FY27–FY29 estimates by 1–2% and set a ₹1,320 target.

Nuvama trimmed earnings estimates by 2–6% and lowered its target to ₹1,225 from ₹1,300, citing macro uncertainty and higher risk-free rates. The spread between targets reflects different views on earnings, valuation and risk; analyst targets are estimates, not assured outcomes.

What investors should take from the quarter

SBI shares ended the results day almost 2% lower, then traded 1.8% higher at ₹987.75 in early Wednesday trading. The moves show a mixed near-term response; the more important question is whether core income momentum can hold as funding needs, expenses and treasury performance evolve. Analysts also described the bank as relatively well positioned for the expected-credit-loss transition, pointing to lower net slippage rates over the past five to seven years than other public-sector banks.

Key Highlights

• Q2 FY27 reported profit rose 14.3% to ₹23,040 crore, including a ₹7,300 crore one-off gain.
• Adjusted profit was about ₹17,000 crore, below Antique’s estimate, partly due to a treasury loss and front-loaded expenses.
• NII rose 14% to ₹49,140 crore; NIM expanded to 2.94% from the previous quarter.
• Loans grew 18% year on year and deposits 12%, with FCNR(B) deposits supporting deposit growth.
• Brokerages retained positive views but cut or reset targets, underscoring uncertainty around earnings and valuation.

Investor Note: SBI’s core income and margin performance provide support, but the one-off contribution to reported profit, treasury swings and deposit growth warrant attention. Investors should weigh their own risk tolerance and assess subsequent operating trends rather than relying on analyst targets alone.