Operational strength, subsidiaries to drive State Bank of India's re-rating

Annual operating profit of Rs 60,000 crore good enough to absorb any increase in provisioning, while high growth potential subsidiaries to drive valuations

Brokerages, both foreign and domestic, recently raised their rating on SBI with a target price of up to Rs 310, indicating potential upside of 50 per cent from the present Rs 207.

SBI’s ability to generate strong operating profit, a strong balance sheet (B/S), and strong growth potential of subsidiaries justifies the re-rating potential, even though it comes when the banking system is exposed to asset quality risk. 

Nitin Aggarwal, analyst at Motilal Oswal, says: “Besides lower funding costs (led by falling deposit rates), market share gains — both in advances and deposits —along with digital capabilities will help SBI maintain strong