Shares of the country’s largest lender State Bank of India (SBI) have delivered over 180 per cent return in the last three years. From trading around Rs 180 in March 2020, the stock is now hovering around Rs 512 (Thursday’s closing price). However, the multibagger stock is currently down over 23 per cent from its 52-week high of Rs 629.65, hit on December 15, 2022.
The state-backed lender has underperformed its peers in returns in the last one year. While shares of Bank of Baroda have delivered a 51 per cent return in a year, Union Bank is the top gainer with a return of 65 per cent during the period. Shares of PNB and Canara Bank have clocked 29 per cent and 22 per cent return, respectively in a year.
The large-cap stock ended 1.42 per cent lower at Rs 505.40 on March 24, 2023. The market cap of the bank fell to Rs 4,51,049.89 crore on the Bombay Stock Exchange.
Brokerages and experts have maintained their bullish stance on this PSU bank stock. Foreign brokerage Jefferies, in its recent report, said the valuation of Indian banks is looking fairly attractive and in some cases, stocks trade below the levels during the height of Covid risk. SBI is also one of its top bank stock picks.
“SBI is one of the best picks for us and is one of the top 3 holdings for our fund. There are a lot of reasons for it. One of them is that we find it one of the best value buy, the ratio and price to book is also very sufficient and great value compared to private banks,” said Rohan Mehta, Founder and Portfolio Manager, Turtle Wealth.
“If you look forward to the price to book value, it is extremely comfortable. If you see 10 years down the line, last 10 years HDFC has performed 3 times more than SBI vs SBI was a great underperformer but if you see in the last 2 years, SBI has done 2-2.5 times better than HDFC bank and that’s a clear indication that the value is getting merged and it is a sheer case of value migration and turn around story for SBI. So it is a ‘Buy’ from our side,” he added.
Motilal Oswal believes that the global banking system has been facing challenges primarily due to liquidity issues rather than asset quality.
SBI, the brokerage, said does not see any significant challenges to the Indian banking system.
“The bank believes that there is an opportunity to pass on the MCLR hike, which along with lagged re-pricing of deposits, should boost margin in the coming quarters. Quality of advances remains fairly under control, with a constant moderation in asset quality ratios. Slippages have been under control and the bank does not expect any challenges,” Motilal Oswal said.
SBI on Technical charts
“SBI has witnessed a sharp correction this quarter, down by almost 17% to currently trade around 500 levels. Overall, the banking sector has come under pressure, on rising investor fears about global recession, and negative news flows relating to the global banking system,” said Aamar Deo Singh, Head Advisory, Angel One Ltd.
“Investors are advised to stay cautious, as technically, if the stock breaches the 500 mark consistently on the downside, we could see further correction in the stock. Ideally, good levels to accumulate would be in the zone of 460-470. On the upside, the stock needs to sustain above 560, for any resumption in an uptrend,” Singh added.
SBI’s Q3 performance
SBI reported a 68 per cent year-on-year (YoY) jump in net profit at Rs 14,205.34 crore for the December quarter compared with Rs 8,431.88 crore in the same quarter last year.
Net interest income (NII) for the quarter rose 24.05 per cent YoY to Rs 38,069 crore from 30,687 crore in the year-ago quarter. Net interest margin for the quarter came in at 3.69 per cent, up 29 basis points. The PSU bank reported a NIM of 3.55 per cent in September and 3.4 per cent in the year-ago quarter.
Also read: State Bank of India shares: 50 analyst views, no ‘sell’ call. Price target that latest recommendation suggests for SBI