The SBI increases by more than 14% in one month. Analysts see up to 20% more gains in one year
SBI share price: State Bank of India (SBI) continues to strengthen its balance sheet and improve its yield ratios. Brokerage Motilal Oswal is bullish on State Bank of India and recommended a buy rating on the stock with a target price of Rs 600 in its recent research report. The brokerage in its note said, “The focus remains on building a superior loan book, while maintaining strong underwriting, as evidenced by lower-stressed assets and higher PCR. This has contributed to a sustained recovery in operating performance and will return yield ratios to the long-term average and possibly higher. »
“With a high share of variable rate loans at 75%, the bank remains well placed to weather rising interest rates. While Retail has contributed to loan growth in recent quarters, the bank is seeing a strong recovery in the Corporate portfolio, reflected in improving utilization ratios. SBIN reported further improvement in asset quality, with PCR improving to 75% (93% in the corporate book). A controlled restructuring (1.1%), a reduction in the SMA pool (13 bps) and a 100% coverage of the SR portfolio provide comfort and would allow credit costs to be controlled (the estimated cost of credit should remain controlled at 1% in FY24),” the added remark said.
Stock price history
The banking stock, which is currently trading near its 52-week high, is up more than 8% in 2022 (YTD) so far, against a 6% decline in the benchmark BSE Sensex. . The stock reached its 52-week high at Rs 549.05 and its 52-week low at Rs 401.30 on February 7, 2022 and August 23, 2021, respectively.
Currently, it is trading 7.25% below its 52-week high and 26.9% above its 52-week low.
In recent years, the bank has gradually gained market share in loans. While PSU banks, in total, have lost 1,130bp in loan market share over the past four years, SBI is an outlier with a 90bp gain to 23%. Utilization levels improved by 860 basis points to 31% in the wholesale portfolio, while retail growth remained flat at 15% year-over-year in FY22. Within retail lending, Xpress Credit is the fastest growing segment with a long avenue for growth. While we estimate loan growth to hold steady at 13% CAGR in FY22-24, we are reasonably confident that SBIN is growing ahead of the market, further improving its loan market share. note.
The report further states, “Deposits increased by 10% year-on-year to Rs 40.5t in FY22. SBIN remains an unbeatable deposit machine, with a deposit market share of 24, 6%. The bank has gained 170 basis points of deposit market share over the past four years. With a stable CASA ratio of 45% in FY22, the cost of deposits (reported) moderated to 3.8% in FY22 from 5.1% in FY22. FY19. As interest rates rise, we expect the bank to pass on some benefits to deposit holders and estimate the cost of deposits at 4.2% in FY24. Furthermore, the C/D ratio, at 67.5% (peak of 86% over the last decade), is significantly lower than that of the best private peers and the system’s C/D ratio of 72%. The bank’s domestic C/D ratio is even lower at 66.7% from FY22. The combination of these two factors will limit the increase in the cost of funding and keep the bank in a good position in an environment rising interest rates.
SBIN reported a RoE of 13.9% in FY22, the highest since FY2016. With several enablers in place, it looks well positioned to exceed the 15% RoE threshold in FY22. 23 and 24. We maintain our conviction BUY rating with a TP of Rs 600.
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