Shares of State Bank of India (SBI) surged around 3% at Rs412 per share on the BSE in Monday's early trading session as most of the brokerage houses are bullish on the stock post its quarterly performance. The stock has surged over 8% in the last two sessions after the lender's Q4FY21 results came above analysts' expectations.

India’s largest lender on Friday reported a record a record profit for the quarter ended March 31, 2021 on the back of higher net interest income and lower provisions. The net profit in Q4FY21 rose 80% to Rs6,451 crore as compared to Rs3,581 crore year-on-year (YoY).

During the quarter under review, the lender’s provisions and contingencies fell 18% YoY to Rs11,051 crore, of which provision for non-performing assets was Rs9,914.23 crore.

The state-run bank’s asset quality improved with gross non-performing assets (NPAs) at 4.98% against 5.44% on a sequential basis and net NPA at 1.5% versus 1.81% quarter-on-quarter (QoQ).

Analysts at Motilal Oswal in a result note said that SBI reported a strong Q4FY21 in a challenging environment. ‘’Asset quality outlook remains particularly encouraging, with record low slippages and controlled restructuring book. Slippages in FY21 stood at 1.2% as compared to 2.3% during FY20. Retail asset quality was impeccable, with slippages significantly lower as compared with peers. The bank is well on track to keep credit cost under control.’’

The brokerage has maintained its Buy rating on the stock with the revised target price of Rs530 per share.

The bank’s deposit growth stood strong, led by healthy CASA trends. The retail loan book grew 16.5% YoY. The earnings was also boosted by recovery of nearly 40 billion rupees as part of dues owed by bankrupt steelmaker Bhushan Power and Steel.

Those at Emkay Global believe that SBI will be one of the biggest beneficiaries of lumpy corporate resolutions and setting up of ARCs (asset reconstruction companies). ‘’SBI’s consistent outperformance on asset-quality front and sharp improvement in RoE (return on equity) trajectory call for a strong rerating.’’ The brokerage has also maintained its Buy rating with a sharp revision in target price to Rs600 (from Rs460 earlier), leading to a strong 50% upside.

The bank’s quarterly performance was better than analysts’ expectations, however, the coming quarters may show some impact of the second wave of the pandemic. On covid impact, SBI said that its major challenges could be from extended working capital cycles, fluctuating cash flow trends and probable inability of the borrowers to meet their obligations against the loans timely. "The bank is proactively providing against the challenges of likely stress on the bank's assets. A definitive assessment of the impact of Covid is dependent upon circumstances as they evolve in the subsequent period," the bank said.