Premium| Listen to this article |
State Bank of India or SBI share price on Thursday closed above ₹500 apiece levels. It has attracted attention of the market observers as to whether it would breach its life-time high of ₹549 per share levels on NSE. According to HDFC Securities report, SBI share price climbing to a new peak is possible in next two quarters as the brokerage sees banking stock to ascend up to ₹570 per share levels in this period.
On valuations of SBI shares; HDFC Securities said, "SBI has reported powerful performance in Q3FY22. The loan book has witnessed strong growth and lower slippage quantum was the key positive surprise element. We expect SBI to grow its loan book at 11 per cent CAGR while NII and Net profit are expected to grow at 11 per cent and 34 per cent CAGR respectively over FY21-24E. ROAA is estimated to improve a bit to 0.9 per cent in FY24E from current 0.5 per cent in FY21."
"The bank is looking at an overall loan growth of around 9 per cent in the near term with recovery in corporate lending while retail loans growth could remain at 14-15 per cent levels. The bank is expecting to recover ₹80bn in FY22, of which almost ₹56bn has been recovered in 9MFY22. We continue to watch out for the steady-state impairments and credit costs, as the bank gradually re-risks the portfolio. Valuations of SBI remain attractive given the medium trends expected on RoEs of the Bank," the brokerage report added.
Highlighting the improvement in asset quality of State Bank of India, brokerage said, "Lower slippages number has helped improve asset quality; GNPA and NNPA improved to 4.5 per cent and 1.3 per cent compare to 4.9 per cent and 1.5 per cent in Q2FY22. GNPA ratio improved across segments with domestic corporate at 7.1 per cent and retail at 0.9 per cent. Provision coverage ratio during the quarter improved by 120 bps QoQ at 71.2 per cent. The bank has fully provided for future retail account."
The brokerage went on to add that even on the digital side, SBI has done excellent job as it has enabled the bank in getting sustainable business. Over the years it has launched numerous digital initiatives through which the bank now has been able to achieve major market share across multiple digital channels such as 14.46 per cent in POS terminals, 27.73 per cent in debit card spends, and 24.72 per cent in mobile banking number of transactions. Being increasingly digital plays a big part in helping the bank in reducing costs, which in turn improves profitability matrix.
On it suggestion to positional investors in regard to SBI share price, HDFC Securities said, "We have valued SBI on SoTP basis to arrive base case fair value of ₹520. Our bull case fair value stands at ₹570. Investors can buy the stock in between ₹475 to 465 & add more on dips of ₹420 band for next 2 quarters."
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
Never miss a story! Stay connected and informed with Mint. Download our App Now!!