State Bank of India is the oldest and largest bank by asset size in India. The size is Rs. 54 lakh crore. You can imagine the breadth of its operations because the lender operates a network of over 22,000 branches and 58,000 ATMs across the country.The bank has strength in retail portfolios and has the best–operating metrics among the public sector banks. It has a strong customer base of 45 crore customers.
The lender also boasts of significant subsidiaries, which provideallied services like investment advisory, money management, Insurance, and broking. The SBI share price has delivered 62% returns in the last five years (mid-June 2022). This is low compared to many private banks, some of which have turned into multi–baggers (stocks that deliver more than 100% returns).
One solace is that in recent years, SBI Bank share price performance has been commendable,thanks to its improving balance sheet and Loan book. Analysts at ICICIdirect have a favourable outlook on the stock‘s prospects.
ICICIdirect believes overall strength in the lending franchise and liability growth of over 9% guidance, along with a well–provisioned book, are among the key positives working for the company‘s business. The broker said that improving return ratios with return on equity (RoE) touching 12-13% and return on assets (RoA) reaching 0.7-0.8% offers long-term visibility for the stock.Analysts at the firm have a BUY rating on the stock.
They value the bank at 1.1 times FY24 expected adjusted book value (down from 1.2 times in an earlier assessment) and subsidiaries at Rs. 186 per share to arrive at a target price of Rs. 605. This means a potential upside of 31% from current share prices.
According to them, the key triggers for future SBI share price performance will be:
-Strong performance on the asset quality front, which is a positive
-Healthy pipeline that will help business growth and overall performance
-Healthy provisions worth around 1.1% to provide comfort on earnings shock
-Improving RoE trajectory to aid improvement in valuations
In its latest earnings, the lender reported stellar credit growth and improvement in asset quality, which are encouraging signs. Its GNPA (gross non-performing assets or total bad Loans) was down 53 basis points quarter on quarter (QoQ) to 3.97%.Net interest income grew 15% compared to the same period during the previous year. The net interest margin was stable QoQ at 3.4%.
Provisions (money allocated insteadof bad Loans) were down 35% year on year (YoY) at Rs.7,214 crore. The company’s net profits were up 41% YoY at Rs. 9,114 crore.
In a SWOT analysis, ICICIdirect finds 10 strengths, including high earnings growth, and seven weaknesses, including rising other income and low operating income. Opportunities and threats seem to be balanced with two each.
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