Mumbai: Analysts at most top brokerages raised or retained share price targets on State Bank of India after the lender reported strong March quarter results. The stock fell 0.36% to close at ₹816.85.
Analysts said the state-owned lender’s results, which beat estimates, were driven by better net interest margins (NIM) and other income, but deposit growth was lagging. However, the management guided for loan growth of 13-15%, prompting analysts to raise estimates.
Analysts at CLSA said that SBI has reported 16-20% return on earnings over the past two years but that was largely due to lower credit costs of reversal of old provisions. They expect returns of 15% over the medium term assuming normalised credit costs of 50-55 basis points.
“If loan growth can sustain in the early teens (and we think it can), multiples could re-rate from current levels of 1.2 times PB (price-to-book). We modestly increase our PAT estimates due to a lower credit cost estimate in FY25,” said brokerage CLSA in a note.
SBI shares are up 6.6% so far this year as against a fall of 2.35% in the Bank Nifty and a 2.06% decline in the Nifty.
Analysts at UBS said that SBI’s deposit growth was lower than its private peers, but the lower loan-to-deposit ratio and higher existing liquidity coverage ratio are advantages for the bank to maintain growth and NIM led to revised price targets.
“We expect SBI’s current RoA (return on assets) of >1% to decelerate as we believe credit costs would trend up from exceptionally low levels,” said UBS in note. “The stock trades at 1.4 times P/BV (price to book value) FY25 Estimated, which we believe is at cyclical high and the risk-reward looks unfavourable.”
