Shares of State Bank of India and Bank of Baroda rallied to their all-time highs on Monday on the back of strong Q2 numbers. SBI stock rose 4.9% intra-day to hit an all-time high of Rs 622.90 while BoB jumped 11.98% to 161.75, the highest since February 2018.
Analysts went on a rerating binge on Monday for both banks. BoB’s NIM expanded by around 30 bps sequentially, which was above expectations, Suresh Ganapathy, analyst at Macquire Research, said in a report, adding that the lender also saw reductions in its credit cost to about 85 bps lower than expected. The brokerage has revised the target price of BoB to Rs 155 per share, driven by higher sustainable return on equity. For SBI, it has reiterated ‘outperform’ rating with a target price of695 per share.
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“Keeping a positive thesis is perhaps the best investment thesis on SBI, despite the sharp outperformance in recent years. The structure of the loan book suggests that the slowdown, if any, appears to be growth slowdown rather than a credit cost problem currently,” Kotak Institutional Equities said in a report.
“BoB has a strong liability franchise and adequate headroom to fund this growth. Furthermore, the has been making investments in its franchise, similar to SBI, though it is behind them currently, which augurs well for its growth in the relatively low-risk retail segment,” the brokerage said.