SBI shares rise as bank ties up with 5 HFCs for affordable loans; Brokerages see 40% upside, should you buy?

State Bank of India (SBI) share price gained on Friday, a day after the lender entered into co-lending agreements with five housing finance companies- PNB Housing Finance, IIFL Home Finance, Shriram Housing Finance, Edelweiss Housing Finance, and Capri Global Housing Finance- to serve the underserved and unserved borrowers. SBI was the top gainer on Sensex, up nearly 1 per cent at Rs 493, while the benchmark was sitting in red. Brokerages remain bullish on SBI stock. “SBIN has reported a RoE of ~12.7% in 3QFY22 – the highest since AQR commenced in FY16 – and appears well positioned to surpass 15% RoE in the medium term,” said Motilal Oswal.

SBI share performance:

Despite the steep market correction so far this year, State Bank of India share price has jumped over 1.5% in the last month and nearly 5% year-to-date. Going forward, brokerages expect the stock to rally around 40 per cent given the fact that SBI has come a long way and is now far better placed in terms of capital, asset quality and earnings, as demonstrated during the Covid peak.

Stock Talk: Should you buy, hold or sell SBI shares?

Motilal Oswal: BUY
Target price: Rs 675

SBI has been reporting strong overall performance led by a revival in loan growth, robust asset quality trends, and controlled funding costs. “Deposit growth stood strong, led by healthy CASA trends, while loan growth is likely to recover gradually over FY22-23E. The asset quality outlook remains encouraging, with the slippage ratio lower than many Private Banks,” said the domestic brokerage firm. The lender has improved PCR to around 71% and holds unutilized COVID-related provisions of Rs 62 billion. SBI has reported a RoE of 12.7% in 3QFY22 and it appears well-positioned to surpass 15% RoE in the medium term. “We reiterate SBIN as our top Buy, with a TP of Rs 675,” said Motilal Oswal.

Emkay Global: BUY
Target price: Rs 680

Emkay Global in its report noted that after the recent market correction due to the Russia-Ukraine conflict, SBI is trading at attractive valuations of 0.9x Mar’24E P/ABV. The lender has come a long way and is now far better placed in terms of capital, asset quality and earnings as demonstrated during the Covid peak. “In our view, the bank’s higher retail orientation and steady improvement in risk-adjusted returns (RoRWA) call for a sustained re-rating. Thus, maintain Buy/OW in EAP, with a TP of Rs 680”, the brokerage said.

Meanwhile, Kotak Securities also has buy call on State Bank of India stock with a target price of Rs 500. Time period given by analyst is intra Day when State Bank of India price can reach defined target. The brokerage recommended investors to keep stoploss at Rs 478.

(The stock recommendations in this story are by the respective research analysts and brokerage firms. Financial Express Online does not bear any responsibility for their investment advice. Capital markets investments are subject to rules and regulations. Please consult your investment advisor before investing.)