Shares of State Bank of India (SBI) rose 5% to a record Rs 621.60 in intraday trade on Monday after the bank’s net profit rose 73.93% year-on-year in the July-September quarter (Q2FY23) at Rs 13,265 crore, helped by higher interest margins and lower bad debt provisions. The country’s largest lender posted a net profit of Rs 7,627 crore in the second quarter of fiscal 2022.

SBI’s net interest income (NII) rose 12.83% year-on-year to Rs 35,183 crore in Q2FY23, compared to Rs 31,184 crore in the previous year. Quarter-on-quarter growth of 12.78% was higher than Rs 31,196 crore in Q1FY23. The bank’s domestic net interest margin (NIM) improved by 3.55% in the second quarter of fiscal 2023 compared to 3.5% a year ago. It improved 5bps QoQ from 3.23% in Q1FY23.

Its asset quality profile has improved, with gross non-performing assets (NPA) falling from 4.9% a year ago to 3.52% in the second quarter of fiscal 2023. The GNPA for June 2022 (Q1 FY23) is 3.91%. The net NPA ratio decreased to 0.8% at the end of the second quarter of fiscal 2023 from 1.52% a year ago and 1% in the first quarter of fiscal 2023.

Analysts at ICICI Securities maintained a “buy” rating on SBI with a target price of Rs 700 per share. The brokerage believes that the sizeable SBI has been upbeat, with above-average earnings and return growth in the quarter. The stock needs a long-term re-rating and should see a strong positive reaction.

The roughly 14-16% credit growth guidance will be driven by stable margins, a healthy deposit business and a strong demand pipeline, which will also help business growth and overall performance. Stable net interest margins and ample provision buffers contribute to solid future earnings momentum. As such, the brokerage said in an earnings update that improving the RoE trajectory could help boost valuations.

Motilal Oswal Financial Services also retained a “buy” rating on SBI with a target price of Rs 700 per share. “SBI delivered strong quarterly results, led by margin expansion and lower provisioning. Even financial performance improved to support other income. Coupled with tighter controls on operating expenses, core PPoP grew 17% year-over-year,” the brokerage said in an earnings update.

The brokerage said that loan growth was strong, and the bank expects the momentum to continue. While deposit costs may increase, the high volume of floating loans benefiting from loan repricing will continue to support NII and overall earnings. It added that asset quality performed strongly, with slippage and overall asset quality ratio continuing to improve, with a restructured book of 0.9%.