Nirmal Bang bullish on this public sector bank; sees over 35% upside 

Nirmal Bang is bullish on the public lender State Bank of India (SBI) and has maintained a 'Buy' rating with a target price of Rs 626 per share. So, if you compare it with the current market price, the stock has an upside potential of over 35 per cent. 

The brokerage firm noted that the asset quality continued to improve, with NPAs declining QoQ and satisfactory performance on accounts coming out of the moratorium. Also, the credit cost for FY22 stood at 94bps and the bank would like to contain it within 100bps going forward. 

The scrip opened a tad higher at Rs 468.40 against the previous close of Rs 467.35. With a market capitalisation of more than Rs 4,10,000 crore, the shares stand higher than 5-day moving averages but lower than 20-day, 50-day, 100-day and 200-day moving averages. 

Nirmal Bang highlighted that the key operational metrics were strong, with overall loan book growing by 11.6 per cent YoY and 6 per cent QoQ. Retail and Corporate both saw healthy and sustainable traction on the back of pick-up in market demand. 

"In the wholesale segment, pick-up in the utilization levels augurs well from growth standpoint. NIM was stable QoQ at 3.12 per cent. With 74 per cent of the loan book on floating rate, we see margins on a positive trajectory going forward," it added. 

India's largest public sector lender reported a 41.2 per cent jump in its standalone net profit at Rs 9,113.53 crore for the fourth quarter ended March 2022. The lender had posted a net profit of Rs 6,450.75 crore in the year-ago period. With this, the bank has registered its highest quarterly net profit in Q4FY22. 

Net profit for the year FY22 grew by 55.19 per cent YoY to Rs 31,676 crore. On the asset quality front, the bank's Gross NPA ratio was down by 101 bps YoY at 3.97 per cent, while Net NPA ratio down by 48 bps YoY at 1.02 per cent. 

Recently, SBI hiked the marginal cost of lending rate (MCLR) by 10 basis points (bps). The upward revision in MCLR rates came into effect from May 15, thus leading to a hike in the interest rates of car and personal loans, as per the SBI website. 

As per the recent revision, MCLR has been hiked from 6.75 per cent to 6.85 per cent across overnight, one month and three-month tenors. The MCLR for six-month tenor has been raised from 7.05 per cent to 7.15 per cent.