SBI shares rose 36% in a year, beat Bank Nifty, Sensex returns; what's next?

Shares of State Bank of India (SBI) have gained 36% in a year. The stock, which closed at Rs 585 on October 9, 2023 ended at Rs 797 on Wednesday, clocking decent returns for investors during the period. In comparison, Nifty Bank rose 16.22% and Sensex climbed 24.35% in the comparable period. In the current session, SBI stock closed 1.91% higher at Rs 797 on BSE. Market cap of the bank stood at Rs 7.11 lakh crore. Total 8.07 lakh shares changed hands amounting to a turnover of Rs 64.34 crore on BSE.

The scrip is trading neither in the overbought nor in the oversold zone, signals its relative strength index (RSI) which is at 43.6. SBI stock has a one-year beta of 1.4, indicating very high volatility during the period.

SBI shares are trading higher than the 10 day, 20 day, 30 day, 200 day but lower than the 50 day, 100 day and 150 day moving averages.          

Global brokerage Nomura has a a 'Buy' call on SBI stock with a price target of Rs 980 per share. 

Nomura said SBI is well-placed to deliver on asset quality given its lower exposure to ‘problematic’ segments and a strong retail underwriting track record.

"SBI has the lowest domestic LDR (loan-to-deposit ratio) among large banks (with arguably one of the strongest deposit franchises), and hence, faces no imminent supply-led pressures on growth," it noted.

Another brokerage Axis Securities has a price target of Rs 1,030 on the banking stock.

“While major asset quality challenges are not visible currently, the ageing provisions on standard assets are likely to drive credit costs to settle at 50bps on a steady state basis. However, we do not expect any challenges to the bank’s ability to protect return on assets at 1-1.1% over FY25-27E. Among PSU banks, SBI is the best play on the growth trajectory of India’s economic growth supported by its (1) Comfortable footing on the credit deposit ratio, (2) Healthy provision coverage ratio, (3) Adequate capitalisation and (4) improved asset quality outlook," said Axis Securities.

Key risks to the bank’s growth is a significant slowdown in credit growth, added the brokerage.

Brokerage Emkay has a buy call with a price target of Rs 1,025 for the banking stock.

"Deposit growth was slower in 1Q, but the bank claims to have enough balance sheet liquidity and would look at tinkering savings rates, if the need arises. Common Equity Tier 1 ratio jumped by 50bps QoQ to 10.8 per cent, benefiting from higher Available for sale reserve (AFS) reserves  as per new the investment classification norms. That said, we believe the bank should raise capital sooner, factoring in the potential impact of the soon-to-be-released final Expected Credit Loss (ECL) norms and growth trajectory," said Emkay Global.

SBI reported a 178.24 per cent year-on-year (YoY) rise in standalone net profit at Rs 16,884.29 crore for the June quarter compared with Rs 6,068.08 crore in the corresponding quarter last year. Net interest income (NII) came at Rs 38,905 crore, up 24.71 per cent over Rs 31,196 crore in the corresponding quarter last year.