According to ClearTax, Public sector banks (PSBs) in India are government-owned financial institutions, with the government holding at least 51% of their share capital. As of December 2024, there are 12 major PSBs, including the State Bank of India, which alone serves 48 crore customers through 22,500 branches and 65,627 ATMs nationwide.
With a market capitalization of Rs 7.22 lakh crore, the shares of State Bank of India were trading at Rs 809.05 per share, decreasing around 0.34 percent as compared to a previous closing price of Rs 811.85 apiece.
Sharekhan, one of the well-known brokerages in India, gave a ‘Buy’ call on the bank stock with a target price of Rs 1,050 apiece, indicating a potential upside of 30 percent from Thursday’s price of Rs 809 per share.
Looking forward to the company’s financial condition, revenue increased slightly by 12 percent from Rs 1,07,391 crore in Q2FY24 to Rs 1,21,045 crore in Q2FY25, net profit increased by 24 percent from Rs 16,648 crore to Rs 20,565 crore.
Here is the rationale for bullish upside potential up to 30%:-
● SBI is poised for steady growth and profitability, with robust asset quality and no major concerns in unsecured retail loans despite a growth slowdown. Liquidity remains strong, supported by a healthy LCR, excess SLR, and a comfortable CD ratio.
● The bank projects double-digit deposit growth in H2FY2025 and ~15% loan growth for FY2025E, driven by a broad-based portfolio. Its CASA franchise remains strong, and the margin impact from potential rate cuts is expected to be minimal due to mitigating levers.
● The bank expects domestic NIM to remain stable, with limited impact from potential rate cuts. Approximately 40% of the loan book is linked to MCLR, which is less volatile to rate changes. Short-term loans can be repriced quickly, supporting a ~15% loan growth in FY2025E.
● Credit costs are anticipated to remain low, with a gradual normalization unless there’s a significant economic downturn. Non-NPA provisions stand at ~0.8% of loans, and the asset quality remains strong. Despite the slowdown, unsecured retail loans and the corporate balance sheet are not showing worrying signs.
● The bank’s CET-1 capital stands at ~9.95%, slightly above the minimum regulatory requirement of ~8.6%. Despite lower CET-1 compared to peers, internal accruals are expected to be sufficient to support the projected credit growth in the near term.
State Bank of India is engaged in providing a wide range of products and services to individuals, commercial enterprises, corporations, public bodies, and institutional customers. The Company’s segments include Treasury, Corporate/Wholesale Banking, Retail Banking, Insurance Business, and Other Banking Business.
Written by:- Abhishek Singh
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