Synopsis: Jefferies maintained a Buy rating on this banking stock, citing strong loan growth, stable margins, improving asset quality, and an upside potential of nearly 28 percent.
The article outlines Jefferies’ bullish stance on this banking company, which offers a wide range of banking and financial services across retail, corporate, SME, agricultural, and international segments.
With a market capitalization of Rs 9,41,938 crore, State Bank of India’s shares closed at Rs 1,020 per share, up by 0.35 percent from its previous close. The share of the company gave a return of 29 percent in the last year.
Brokerage View
Jefferies maintained a Buy rating on SBI with a target price of Rs 1,300, implying an upside potential of 27.9 percent from the previous close, supported by healthy loan growth, stable profitability, and attractive valuations.
Corporate Loan Repricing Key for Margins: Jefferies highlighted that the repricing of corporate loans will be crucial for sustaining Net Interest Margins (NIMs). As deposits tend to mature faster than assets, deposit rates could adjust more quickly, making loan repricing important to protect profitability.
Improving Operating Metrics: The brokerage noted that SBI has consistently improved its deposit-per-branch productivity while reducing its reliance on Priority Sector Lending Certificates (PSLCs). These improvements have strengthened operational efficiency and supported the bank’s overall earnings profile.
Fee Income and Provision Strength: SBI has also benefited from strong bancassurance fee income, which provides an additional revenue stream. The bank continues to maintain limited buffer provisions, although Jefferies highlighted that the transition to the Expected Credit Loss (ECL) framework could pose a modest risk.
Growth Outlook and Valuation: Jefferies expects SBI to deliver a loan growth CAGR of around 13 percent along with a Return on Equity (ROE) of 14 percent over the medium term. The brokerage believes the stock remains reasonably valued at 1.4x FY27 adjusted price-to-book.
Robust performance supporting the rationale
Robust Financial Performance: SBI reported a strong FY26 performance, with net profit rising 12.88 percent YoY to Rs 80,032 crore and operating profit increasing 11.25 percent YoY to Rs 1,23,015 crore. The bank delivered a Return on Assets (ROA) of 1.12 percent and Return on Equity (ROE) of 18.57 percent, while maintaining Whole Bank NIM of 2.91 percent and Domestic NIM of 3.03 percent.
Strong Growth and Asset Quality: The bank’s advances grew 16.87 percent YoY to surpass Rs 49 trillion, driven by SME growth of 20.99 percent, agriculture growth of 19.68 percent, and retail growth of 15.22 percent. Whole bank Deposits crossed Rs 59 trillion, supported by 10.60 percent growth in savings deposits and 14.77 percent growth in retail term deposits. Asset quality remained strong, with Gross NPA at 1.49 percent, Net NPA at 0.39 percent, credit cost at 0.37 percent, and provision coverage ratio including AUCA at 91.97 percent.
The State Bank of India (SBI) is the largest and oldest public sector banking institution in India, headquartered in Mumbai. Tracing its roots back to 1806, it functions as a multinational financial services corporation and plays a massive role in the Indian economy.
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