Banking analysts largely maintained their "Buy" rating on the SBI stock because they pointed out that the PSU bank does not have a liability challenge, even though loan growth exceeded deposit growth. State Bank of India (SBI) reported yet another quarter of consistent performance, with strong loan growth momentum, a sequential pick-up in deposits, and no negative surprises on the asset quality front. They anticipate that net interest margins (NIMs) will remain at their current levels.
Nuvama Institutional Equities maintained its "Buy" recommendation on SBI with an unchanged target price of Rs 1,026. It stated that even if the policy rate is lowered, the impact on NIM will be minimal due to the recent 30 bps MCLR boost.
Despite the enormous size of the balance sheet, analysts said the PSU bank produced solid business growth momentum in Q2, with deposits reporting a good growth of 9.1% YoY and advances expanding at a rate of 15.3% YoY. With broad-based growth across all segments in 2HFY25, the state-run bank is still optimistic about delivering loan growth in the projected range of 14–16% for FY25. After a slow increase in H1FY25, it anticipates a return in auto loan growth and a home loan growth rate of roughly 13–14% YoY.
"SBI's independent company is worth 1.5 times the September 2026E ABV, according to our valuation. By adding Rs 246.40 in subsidiary value per share, we get at our target price of Rs 1,065 as opposed to Rs 1,059 initially. Our goal multiple is 13.7% higher than the previous five-year average multiple of 1.3 times ABV", according to Nirmal Bang Institutional Equities.
Given SBI's dominant position in corporate and retail banking, its high balance sheet liquidity, and its impeccable asset quality, the brokerage has a bullish outlook for the bank in the long run.
Despite issues with asset quality, deposits, regulations, and rate cuts, SBI is ranked among the best in the industry, according to Nomura India. As a result of decreased opex and stronger non-interest income in Q2, it increased its FY25–27 EPS expectations by 4–7%.
"At 1.1 times FY26F P/BV (7 times P/E), the core bank's current values are appealing for 19–16% RoEs (and 15–14% loan growth) during FY25–27F. SBI continues to be our top choice," it stated.
Strong treasury income and consistent net interest income (NII) were the main drivers of SBI's quarterly earnings, according to MOFSL.
Although margins sequentially decreased by 8 basis points, the bank anticipates that NIM will remain at its present levels with the help of levers like the CD ratio and MCLR repricing.
"While the unsecured book (Xpress Credit) continued to be moderate, credit growth remained robust. After a slow first quarter, deposit growth was robust, but the CASA mix is still moderate. The domestic CD ratio for the bank has decreased to 67.9%. The containment of new slippages and credit costs highlights the enhancement of underwriting standards and allowed for additional NPA ratio decrease," according to MOFSL.
This brokerage recommended purchasing the stock with a target price of Rs 1,000.
Although SBI's restructured book was well under control at 0.38 percent of advances, PSU accounts caused the SMA pool to significantly expand to 36 basis points of loans from 12 basis points of loans in Q1.
"SBI's impressive performance highlights the efficacy of its tactics and flexibility in a demanding banking market. The bank's non-performing asset (NPA) ratios have improved, indicating a favorable trend in asset quality, notwithstanding worries over unsecured retail loans. SBI's ability to handle economic swings is improved by its steady performance on important financial indicators and strong asset base," according to Manish Chowdhury, Head of Research at Stoxbox.
According to Chowdhury, the bank's future success will depend on its capacity to control operating expenses, keep an eye on margin patterns, and improve asset quality even more.
SBI's stock has increased 31% so far this year. Over the last year, SBI's stock has increased by 45%.
