SBI shares are trading near 52-week highs. Motilal Oswal has the tag ‘Buy’ | Rare Techy


State Bank of India (SBI) continues to strengthen its balance sheet and improve profitability. The focus remains on building a high loan book, while maintaining a strong underwriting as evidenced by lower stressed assets and higher PCR.

“This has helped sustainably in operating performance and will drive rates of return to the long-term average and possibly higher. SBI has delivered a strong performance in a challenging macro environment, driven by sustained business and revenue growth and controlled margins.” has provided,” said Motilal Oswal, an in-house brokerage and research firm.

The brokerage has a Buy rating on SBI shares with a target price 600 each. The banking company, which is now trading near its 52-week high, is up 8% so far in 2022 (YTD) compared to a 6% drop in the benchmark BSE Sensex.

The lender’s management expects that as utilization levels improve, while sales growth remains healthy, while sales growth remains steady. A higher mix of current loans and CASA mix will support margins in a higher interest rate environment, according to the brokerage.

“Asset quality performance has been strong, and the outlook remains healthy, with a restructured book and SMA pool. We estimate the cost of credit to be controlled by 1% in FY24, over FY22-24 28% earnings CAGR. We expect SBI to deliver a RoA/RoE of 0.9%/16.7% in FY24. SBI remains our largest acquisition in the sector,” added Motilal Oswal.

Over the last few years, public sector banks have been gradually gaining market share in loans. While PSU Banks, as a whole, lost 1,130 bp of market share in loans over the last four years, SBI posted a 90 bp gain, down from 23 percent.

“Among Retail loans, Credit Xpress is the fastest growing segment and offers a long-term growth trajectory. While we estimate credit growth to continue at 13% CAGR over FY22-24, we are reasonably confident As SBI grows ahead of the market, it improves its credit market share,” the note said.

The views and recommendations made above are those of individual analysts or brokerage firms, and not those of Mint.

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