SBI shares rise 35% from January low, can the stock hit four-digit mark?

Shares of State Bank of India (SBI) have gained 35% from their January low. The stock, which closed at Rs 605.05 on January 23, 2024 was trading at Rs 817.65 on Tuesday, delivering decent returns for investors during the period. SBI stock was trading on a flat note at Rs 816.85 on the BSE. Market cap of the bank stood at Rs 7.29 lakh crore. Total 0.90 lakh shares changed hands amounting to a turnover of Rs 7.35 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 50.4. 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, 150 day, 200 day but lower than the 30 day, 50 day and 100 day moving averages.          

The stock has risen 27 % in 2024 and gained 41% in a year.

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.

ICICI Securities has a price target of Rs 1,000, valuing core banking business at unchanged multiple of 1.6 times FY26 ABV.

"Our target multiple is higher than projected RoA as we accord premium due to strong execution, healthy deposits franchise, superior PPoP growth, continued comfort on asset quality and high visibility of over 16 per cent RoE. On a relative basis, we see SBI dealing with lesser challenges on growth due to comfortable LDR and liquidity. We are also not worried about the impending change of guard at SBI," it said.

The lender 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.