Axis Securities favors SBI among PSU banks for its strong PCR, robust capitalization, resilient liability franchise, and improved asset quality outlook in line with the gradual Indian economic recovery.
State Bank of India (SBI), the largest public sector bank in terms of assets, deposits, branches, customers, and employees, has yielded a 4% return in 2023 thus far. This performance falls short of the Bankex's 10% increase on the BSE and the BSE Sensex's 17% rally over the same period.
However, for 2024, SBI has secured a place among the top picks for several brokerages, including Axis Securities, SMC Global, and Motilal Oswal Securities, among others.
According to Axis Securities, SBI stands out among PSU banks as the optimal choice for benefiting from the gradual recovery of the Indian economy, attributed to its healthy PCR, robust capitalization, strong liability franchise, and improved asset quality outlook.
The brokerage is confident that SBI is well-positioned to achieve a return on assets of 1% and a return on equity of 16% over FY24-26E, supported by consistent credit costs and stable cost ratios.
The brokerage recommends a Buy on the stock with a target price of Rs 800 per share, indicating a substantial upside of 25% from the current market price (CMP).
According to SMC Global, the PSU bank has demonstrated robust performance across various parameters, surpassing industry standards in some aspects and aligning with industry performance in others.
The bank's substantial enhancement in asset quality is attributed to its strong underwriting practices, as per SMC Global.
It's worth noting that SBI aims to double its home loan portfolio over the next five years. To achieve this goal, the bank is reinforcing its underwriting capabilities to enhance service delivery.
SMC Global has set a price target of Rs 791 for the stock, considering an 8-10 months’ time frame, based on a two-year average P/BV of 1.73 times and FY25 BVPS (book value per share) of Rs 457.07.
SBI is also featured among Motilal Oswal's selected stocks for 2024, albeit with a more conservative target of Rs 700, as per this brokerage. In addition, InCred Equities has proposed a target price of Rs 750 for SBI. In a bullish scenario, considering a 10% surpassing of its estimates and a higher multiple of 1.4 times, InCred Equities suggests a target price of Rs 850 for SBI.
Disclaimer: Business Today provides stock market news for informational purposes only and should not be considered as investment advice. Readers are advised to seek guidance from a qualified financial advisor before making any investment decisions.
