SBI shares soar to new highs, analysts bullish on future prospects

February 15, 2024

State Bank of India (SBI), the country’s largest lender, has been on a winning streak in the stock market, as its shares have risen by 33 per cent in less than three months, and by 17 per cent in February alone.

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The stock touched a new 52-week high of ₹355.50 on Thursday, as investors cheered its strong performance in the third quarter of the fiscal year 2023-24, and its improved outlook for the coming quarters.

Motilal Oswal expects SBI to achieve 13–14% loan growth over FY23–26E, aided by an improved disbursement rate for sanctioned loans and a recovery in corporate demand. (REUTERS)

SBI reported a net profit of ₹7,075 crore for the quarter ended December 31, 2023, up by 41 per cent year-on-year, beating analysts’ expectations. Its net interest income, the difference between interest earned and interest expended, grew by 3.7 per cent to ₹28,820 crore.

The bank also improved its asset quality, as its gross non-performing assets (NPAs) ratio declined to 4.77 per cent from 5.28 per cent in the previous quarter, and its net NPA ratio fell to 1.23 per cent from 1.59 per cent.

SBI also announced an interim dividend of ₹4 per share, which will be paid on March 15, 2024.

Several brokerage firms have raised their target price and rating for SBI, citing its robust growth prospects, attractive valuation, and strong capital position.

Motilal Oswal, a leading financial services company, has given a ‘buy’ rating to SBI, with a target price of ₹410, implying a 15 per cent upside from the current level. It expects SBI to achieve a loan growth of 13-14 per cent over the next four years, driven by higher disbursement of sanctioned loans and recovery in corporate demand.

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It also expects SBI to maintain its net interest margin at 3 per cent, and improve its return on assets to 0.9 per cent by the fiscal year 2025-26.

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“SBI remains our top pick among PSBs (public sector banks), given its strong liability franchise, healthy capitalization, and improving operating efficiency,” Motilal Oswal said in a report.

Other brokerage firms, such as ICICI Securities, HDFC Securities, and Emkay Global, have also given a ‘buy’ rating to SBI, with target prices ranging from ₹375 to ₹400.

SBI, which has a market capitalization of over ₹3.2 lakh crore, is the most valued bank in India, ahead of HDFC Bank, ICICI Bank, and Kotak Mahindra Bank. It has a customer base of over 490 million, and a network of over 22,000 branches and 58,000 ATMs across the country.

Source : mint

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