SBI shares: ‘Buy’ or ‘Sell’? Brokerages see this much upside after stake sale, Q1 financial results

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August 3, 2020 1:21 PM

Around 1 PM, SBI shares were trading flat to positive at Rs 191.60 apiece, as compared to a 1.40 per cent fall in the benchmarks S&P BSE Sensex

SBI, state bank of indiaSBI is a beneficiary of liquidity with huge deposit inflow in these uncertain times of Covid-19

State Bank of India (SBI) share price gained over 1.5 per cent to hit the day’s high of Rs 194.50 apiece in an otherwise weak market on Monday. SBI shares were one of the top Sensex gainers today. In previous SBI reported an 81 per cent rise in its standalone net profits at Rs 4,189 crore in the April-June quarter, as compared to Rs 2,312 crore in the corresponding quarter of the previous fiscal. Research and brokerage firms are upbeat on this index heavyweight stock recommending to ‘buy’ with a potential upside of nearly 50 per cent in target price. “SBI reported strong operating performance in a challenging environment. Slippages were lower, helped by the RBI’s dispensation, which resulted in an improvement in asset quality ratios,” Motilal Oswal said in a research report post first-quarter earnings. It also added that SBI has prudently improved PCR (provision coverage ratio) over the last few years and has one of the lowest stressed assets amongst corporate banks.

It will take SBI shares to jump 49 per cent to reach the price target of Rs 285 apiece pegged by the brokerage firm. Around 1 PM, SBI shares were trading flat to positive at Rs 191.60 apiece, as compared to a 1.40 per cent fall in the benchmarks S&P BSE Sensex. The profit of SBI in the first quarter was supported by the one-time gain from the stake sale of a certain portion of investment in bank’s subsidiary SBI Life Insurance Company Limited.

Research and brokerage firm Sharekhan has predicted a target price of Rs 280 apiece, an upside of 46.5 per cent from the previous close. “While markets are factoring in tough conditions on growth and uncertainty on credit costs, there are business strengths for the largest bank in India with consistent NPA decline and reasonable margin cushions. Moreover, high coverage and strong market position of the bank are positive cushions,” it said.

Owing to SBI’s strong liability profile, high retail orientation, reasonable capital position and cheap valuations, Emkay Global Financial Services like SBI among PSBs. It has maintained a buy rating to the stock with a target price of Rs 240 apiece, a jump of 25.7 per cent. “SBI remains reasonably capitalized by PSB standards. The management believes that there is no hurry to raise fresh equity capital unless the bank sees a sustainable strong growth trajectory,” it said in its latest report.

SBI is a beneficiary of liquidity with huge deposit inflow in these uncertain times of Covid-19. Also, stake sale in strong subsidiaries like SBI Cards, SBI Life boosted capital, avoiding equity dilution, says ICICI Direct Research. The brokerage firm sees a potential upside of 12.56 per cent from the previous close. It has pegged a target price of Rs 215 apiece with a ‘hold’ rating. “Legacy book being provided for, wage provision needs also limited and scope for NIM expansion augur well for the bank’s future earnings. Covid19 provisions and a hangover of Yes Bank are keeping the stock performance muted,” it said in a report

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