State Bank of India (SBI) share price jumped over 3.6% on Monday to touch an intraday high of Rs 461 on BSE after the lender, on 13 May, reported a 41% on-year rise in net profit at Rs 9,113.5 crore, its highest ever. Profit growth came on the back of 15.3% growth in net interest income (NII) which stood at Rs 31,198 crore. Brokerages remain bullish on the stock, and see up to 51% potential rally going forward on the back of pick-up in credit growth, steady improvement in asset quality and return profile. LKP Securities expects SBI to post a ROA, ROE of 0.8%, 14% respectively by FY23, led by healthy balance sheet growth along with higher PCR and stable asset quality.
Stock talk: Should you buy, hold or sell SBI shares?
ICICI Securities: Buy
Target price: Rs 673, Upside: 51%
According to analysts at ICICI Securities, State Bank of India exited FY22 with 13.9% RoE and 0.67% RoA aided by growth build-up, credit cost at less than 1% and steady margin profile. Credit growth gathered pace in Q4FY22 led by sequential uptick in corporate and retail. Slippages were curtailed at 0.4% and GNPAs settled at 3.97%, a decadal low. “PAT growth of >40% to Rs 91.1 billion was below I-Sec and consensus expectations due to higher overhead costs and investment depreciation. Improved visibility on asset quality with ‘new normal’ credit cost of 1%, credit growth of 13%/15% for FY23E/FY24E, asset resolution and stable NIMs will drive RoE to >16% by FY23E/FY24E and valuations to 1.5x Sep’23E book,” the brokerage said. It maintained a ‘buy’ call on the stock with a target price of Rs 673 per share.
Motilal Oswal: Buy
Target price: Rs 600, Upside: 35%
SBI delivered a healthy 4QFY22, led by steady NII growth and controlled provisions. Loan growth stood robust. The management expects the momentum to remain healthy as utilization levels improve, while Retail growth is likely to remain steady. Analysts at Motilal Oswal said, “A higher mix of floating loans and CASA mix will support margin in a rising interest rate environment. Asset quality performance has been strong. The outlook remains strong as the restructured book remains in control at 1.1%, while the SMA pool has declined further to 13bp of loans.” The brokerage expects the SBI to deliver a RoA/RoE of 0.9%/16.7% in FY24. “The bank remains our conviction Buy in the sector,” it said. Motilal Oswal revised target price to Rs 600/share (1.2x FY24E ABV + Rs 195 from its subsidiaries.
LKP Securities: Buy
Target price: Rs 565; Upside: 27%
Analysts at LKP Securities stated that SBI has established total standard asset and contingent provision of Rs 30,600 crore (112bps of net advances) as on 4QFY22. With improving asset quality, ample contingent buffer and strong growth outlook, the brokerage believes the ROE target of 15% is achievable in mid run. “We expect SBI to post a ROA/ROE of 0.8%/14% by FY23E led by healthy balance sheet growth along with higher PCR and stable asset quality. We recommend BUY with target price of Rs 565 (potential upside of 27%). We value the standalone bank with PBV of 1.3xFY23E Adj. BVPS of Rs 320 and value of subsidiaries per share of Rs 149,” the brokerage said. It has a ‘buy’ call on the stock with a target price of Rs 565 per share.
JM Financial: Buy
Target price: Rs 590, Upside: 33%
Analysts at JM Financial Services expect incremental stock price performance for SBI stock. “We maintain our positive stance on SBIN and expect it to report RoA/RoE of 0.8%/16% by FY24E. SBI is currently trading at 1.0x FY24E BVPS (core bank) which is at its long term mean valuations SBI is currently trading at 1.0x FY24E BVPS (core bank) which is at its long term mean valuations and we expect incremental stock price performance for the stock to be driven by a) pick-up in credit growth and b) steady improvement in asset quality and return profile (FY22 RoE of 13.9%),” they said. The domestic brokerage has a ‘buy’ call on the stock with a target price of Rs 590, valuing the core bank at 1.25x FY24E BVPS.
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