State Bank of India shares: 39 analyst views, no ‘sell’ call. Price target that latest recommendation suggests for SBI
State Bank of India (SBI) is a consensus buy with 31 ‘strong buy’ calls, six ‘buy’ calls, one ‘Hold’ and no sell recommendation. Post its meeting with SBI Chairman Dinesh Kumar Khara, Motilal Oswal Securities has come out with an update on the stock with a ‘Buy’ rating and a target of Rs 725. That target suggests a 39 per cent potential upside over Tuesday’s closing price of Rs 521.75. The average target price of Rs 706 on the counter, as per publicly available data with Trendlyne, suggests a 35 per centr potential upside for the stock.
The global banking system has been facing challenges primarily due to liquidity issues rather than asset quality. The portfolio duration and concentration of loans/deposits under various categories have also caused problems. That said, the domestic banking system has remained quite resilient thanks to active supervision and higher governance standards set by the RBI.
SBI, Motilal Oswal Securities, 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, which 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’s initial target, Motilal Oswal noted, is to bring down the non-performing assets and SMA books on a yearly basis. The gross NPA ratio in the retail segment is 0.67 per cent, while average LTV stands at 55-60 per cent, and thus the bank does not expect any challenges going ahead.
“The focus remains on keeping the credit cost at 50 bps. On the recovery front, since chunky recoveries are largely over, the bank expects granular recoveries going ahead. In terms of the restructured book, the bank is carrying PCR of 30 per cent with controlled NPAs; hence, the bank does not expect any significant challenges from this book,” it said.
Motilal Oswal said SBI’s robust performance has been aided by strong loan growth, margin expansion and lower provisions. The improvement in its treasury performance, which has supported other income, and controlled opex, led to healthy growth in core pre-provision operating profit (PPOP), it said.
The domestic brokerage expects a high mix of floating loans, benefitting from the re-pricing of MCLR loans, will continue to aid net interest income (NII) and earnings, even as the cost of deposits may see some increase.
“The asset quality performance remains strong with consistent improvements in headline asset quality ratios, while the restructured book remains under control at 0.9 per cent,” it said while adding that SBI is one of its preferred picks in the banking sector.
The brokerage expects SBI to deliver return of asset (RoA) of 1 per cent and return on equity (RoE) of 17.2 per cent by FY25. SBIN is one of our preferred picks in the sector.
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