SBI m-cap nears Rs 6 trillion as stock hits new peak; surges 17% in 1 month

MOFSL estimates PSBs to sustain ongoing earnings traction, aided by improved loan growth, margin stability, and controlled credit costs

Shares of State Bank India (SBI) hit a new high of Rs 659.50, up nearly 2 per cent on the BSE in Tuesday's intraday trade, amid heavy volumes on expectation of healthy profitability over the medium term.

In the past one month, the stock of the country's largest public sector bank (PSB) has outperformed the market by surging 17 per cent. In comparison, the S&P BSE Sensex and the Nifty 50 are up nearly 9 per cent, while the Nifty PSU Bank index gained 14 per cent during the period.

A sharp rally in the stock price has pushed the market capitalisation of SBI towards Rs 6 trillion. At 12:34 PM, SBI's market capitalisation stood at Rs 5.86 trillion and is 2 per cent away to achieve the landmark figure. The counter saw huge trading volumes today with a combined 11.9 million equity shares having changed hands so far on the NSE and BSE.

SBI's management expects credit growth for the full year to be around 14-15 per cent. While retail has been the key driver of overall credit growth in the last few years, corporate loans have also been growing at a healthy pace in recent quarters.

The lender has slowed unsecured retail loans as the lender will focus on 'healthy' growth, even if overall loan growth is expected to stay robust at 15 per cent in this financial year amid steady demand from corporates, Chairman Dinesh Khara said. CLICK HERE FOR MORE DETAILS

Last week, SBI, in an exchange filing, said it will be signing EURO 70 million Line of Credit with KfW (German Development Bank) for supporting Solar PV projects in India.

SBI is a public sector bank, and is the largest bank in India with a balance sheet size of over Rs 55 trillion. Post Covid, the bank has delivered sustained recovery in both business growth as well as asset quality. Strong distribution network, diversified product mix, and large customer base remains core strengths of the bank which enables it to deliver the best operating metrics in the PSU banking space.

According to Care Ratings, the bank been raising non-core capital and has raised Tier-II bonds of Rs 4,000 crore and ATI bonds of Rs 15,133 crore during FY23 to support its capitalisation levels. It has an enabling board approval to raise funds up to Rs 50,000 crore, including ATI and TierII bonds for FY24, which will help fund its growth.

While the overall capitalisation level is adequate, the strong internal capital generation, going forward, is expected to support the capitalisation levels of the bank over the medium term.  

CARE Ratings, in its rationale notes, said that the non-performing asset (NPA) levels in the personal loan segment remained well below 1 per cent. Although the bank has witnessed growth in corporate advances, its focus on retail is expected to continue and drive credit growth in the near term.

The ratings agency has 'stable' outlook on SBI's instruments, which reflects Care Ratings' expectation that SBI will continue to maintain its steady growth in advances, deposits, and a healthy profitability profile over the medium term, while maintaining stable asset quality, and comfortable capitalisation levels.

Meanwhile, Motilal Oswal Financial Services estimates PSBs to sustain ongoing earnings traction, aided by improved loan growth, margin stability, and controlled credit costs thus driving continued rerating of the sector. A reflection on PSBs valuation history may cause trading multiples to look constrained; however, the quality of earnings, growth outlook, and broader re-rating in PSU entities will nevertheless enable steady performance of the sector.