SBI hits new high, up 31% in 6 weeks; market-cap hits Rs 7 trillion-mark

Brokerages remain upbeat on the stock following strong show in Q3 earnings

Shares of State Bank of India (SBI) reached a new high at Rs 786.4, rising by 1.8 per cent on the BSE in Tuesday’s intraday trade. The stock of the country’s largest public sector lender surpassed its previous high of Rs 777.5, touched on February 21. In comparison, the S&P BSE Sensex was trading weak.

At closing, SBI’s market capitalisation was Rs 6.996 trillion on the BSE and Rs 7.002 trillion on the National Stock Exchange.

In the past six weeks, the stock price of SBI has risen by 31 per cent, attributed to the bank’s robust performance in the October-December quarter (Q3) of 2023-24.

SBI expects credit growth to remain healthy, projecting a growth rate of 14-15 per cent in 2024-25 estimates (FY25E), in line with industry growth. The corporate loan pipeline for the bank remains robust at Rs 4.6 trillion, with a focus on the renewable sector as the next growth trigger. Continued traction in the small and medium-sized enterprise and retail segments is expected to sustain broad-based demand.

Meanwhile, SBI’s asset quality remains resilient, with slippages below 1 per cent and provision coverage ratio (PCR) at around 75 per cent in the recently concluded quarter.

Analysts expect slippages to remain steady, keeping credit costs at 50 basis points in FY25-26E, supporting the earnings trajectory.

“SBI has demonstrated its strength in the past few quarters, both in core operating performance and asset quality. The management remains confident in growth, maintaining margins, and improving return on asset (RoA) ahead. With the normalisation in staff costs, we expect RoA to remain at 1 per cent in FY25-26E. Gains in treasury and recovery from existing stressed books could act as a positive surprise,” said analysts at ICICI Securities in a Q3 result update note.

SBI’s performance in loan growth and asset quality also remains healthy.

Analysts at Sharekhan believe that the bank is likely to sustain RoA of around 1 per cent in the near-to-medium term. The brokerage firm also acknowledges that the bank needs to ramp up other avenues of productivity (fee income and operating expense) to drive RoA/return on equity expansion, which would help in building higher capital buffers through internal accruals.

“The bank has an additional non-NPA provision of nearly 1 per cent of loans outside the PCR to take care of any uncertain future events, which is a key positive,” analysts at Sharekhan said in the result update note, maintaining a ‘buy’ rating on SBI with a target price of Rs 915 per share.

According to Bloomberg, eight of the latest 10 brokerage recommendations are bullish (‘buy’) on the stock, and two are ‘neutral’. Their average one-year target price is Rs 795.