The shares of this public sector bank hit 52-week high of Rs 660.40 apiece after a well-known brokerage recommended a ‘buy’ rating.
With a market capitalization of Rs 5.84 lakh crores, the shares of State Bank of India (SBI) trading at Rs 655.55, decreased around 0.01 percent compared to the previous closing price of Rs 655.90 per share.
Looking into the State Bank of India’s performance, total income increased by 25 percent from Rs 1,14,742.48 crore in Q2 FY23 to Rs 1,44,256.12 crore in Q2 FY24. During the same period, net profit increased by 9 percent, from Rs 15,297 crore to Rs 16,648 crore.
As of September 30, 2023, the CASA ratio of the State Bank of India (SBI) was 41.88%, and Net Non-Performing Assets (Net NPA) decreased by 7.1% from ₹22,995 crore to ₹21,352.4 crore, QoQ.
Motilal Oswal, one of the well-known brokerages in India, gave a ‘Buy’ call on the bank stock with a target price of Rs 800, indicating a potential upside of 22 percent from Wednesday’s opening price of Rs 655 per share.
Here are the reasons for the bullish target price:
● Loan Growth and Provisions: SBIN’s strong performance is attributed to robust loan growth and lower provisions. This indicates that the bank has been successful in expanding its loan portfolio.
● Operating Expenses (Opex): The elevated operating expenses are primarily due to high wage provisions, which have impacted the growth in pre-provision operating profit (PPoP). This suggests that the bank has been allocating significant resources to cover employee-related costs.
● Net Interest Margins (NIMs): NIMs have experienced a decline in recent quarters. The management anticipates broadly stable margins with a slight downside bias. The bank is implementing measures such as managing the CD ratio and repricing the MCLR to counter the impact of increasing deposit costs.
● Asset Quality: SBIN’s asset quality remains strong, with consistent improvements in headline asset quality ratios. The restructured book, which represents loans that have been restructured due to financial stress, is under control at 0.6%, along with a lower SMA pool at 12bp of loans
● Financial Outlook: The estimation for FY25 suggests that SBIN is expected to deliver a return on assets (ROA) of 1.1% and a return on equity (ROE) of 18.3%. This implies that the bank is projected to generate a healthy return relative to its assets and shareholders’ equity.
With a market share of 25.90 percent for debt card spending, 29.72 percent for ATMs, and 21.58 percent for transaction value, the State Bank of India leads the digital banking space across all channels. Furthermore, as of the end of March 2023, the overall capital adequacy ratio (CAR) is 14.68%, up 85 basis points year over year.
Written by:- Abhishek Singh
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