SBI shares: Brokers see up to 50% upside in the stock | Rare Techy

According to Motilal Oswal, State Bank of India’s (SBIN) annual report highlights the strong progress the bank is making in strengthening its balance sheet and returning RoE to the long-term average of 15%. The focus remains on building a high loan book, while maintaining a strong underwriting as evident in its low stress assets and high PCR.

Motilal Oswal said in a note that “SBI’s Corporate Division reported ~5x increase in PBT to INR270b, highlighting the structural improvement in the corporate business. The segment thus accounted for ~51% of total profit in FY22 v/s contributed 17% in FY21. The PBT of sales increased by 33% in FY22 and decreased by 48% in FY21, which was adversely affected by the pandemic conditions.

On the digital front, YONO continued to set new records with ~112 million downloads and ~48 million registered users, with average daily logins of ~16.6 million as of FY22. SBIN sanctioned 1.14 million digital loans worth INR211b in FY22 and overall, 36% of its retail accounts and 63% of SA accounts were opened through YONO in FY22, the brokerage said.

“SBIN delivered a strong FY22 driven by sustained business/revenue growth and controlled margins. Management expects this to continue while utilization levels improve, while sales growth remains healthy. A high mix of floating loans and CASA mix will support margins in a high interest rate environment. Asset quality performance has strengthened and the outlook remains healthy as the restructured book remains under control at 1.1%, while pool SMA has further declined to 13bp on borrowings. We conservatively estimate cost of borrowing at a modest 0.9%, enabling 28% revenue CAGR over FY22-24. Thus we expect SBIN in FY24, yield 0.9%/16.7% RoA/RoE, respectively. SBIN remains our top BUY in the sector at a TP of INR600 (based on 1.2x FY24E ABV + INR195 from shares),” Motilal Oswal said in a note.

On the other hand, ICICI Securities said in its report that “From ‘corporate banking, sustainable enterprise’ in FY20 to ‘Resilience, People, Technology’ (as future growth pillars) in FY21, State Bank of India (SBI) FY22 The annual report is themed ‘Setting new standards in banking development’ focusing on productivity, adaptability, sustainability and inclusion.”

SBI ~ 468 million depositors, 142 million financial inclusion accounts (BC channel), 14.2 million farmers served, 4.5 million home loan customers, 35% more market share (among banks) in home loans, 27, 6% in debit card spending, 15.2% 95.5% transaction share in alternative channels, > 48 million registered YONO users, 55 trn government business turnover, 17.9 million salary savings accounts, 9.8 million accounts new regulatory savings released in FY22, etc.

“SBI posted FY22 to 13.9% RoE and 0.67% RoA helped by growing growth, GNPAs at decade lows, falling to <1%, cost of credit at 55bps and stable margin profile. Better outlook a on asset quality with a 'new normal' credit cost of 1%, credit growth of 13%/15% for FY23E/FY24E, capital adequacy and sustainable NIMs will see RoE rise to 16% by FY23E/FY24E and valuations at 1.5x Sep'23E Book. Maintain BUY with an unchanged target price of Rs 673,” claimed ICICI Securities.

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