SBI share price: UBS ups target on PSU bank after recent tepid show; here's why

Foreign brokerage UBS has upped rating on State Bank of India (SBI) to 'Neutral' from 'Sell', as it sees risk-reward balanced. Sustaining of net interest margin (NIM) is key for the stock's re-rating going ahead, the brokerage said.

The SBI stock trades at 1 time September 2026 price to book value and at 20 per cent premium to Bank of Baroda (BOB). UBS suggested a fresh target price of Rs 840 on the PSU bank from Rs 760 earlier, hinting at a potential 8 per cent upside from Thursday's closing price of Rs 779.90 on BSE. 

To be sure, SBI has underperformed Bank Nifty by 7 percentage points over the last year. Still, the Street might be pricing in higher than system growth, UBS said adding that the capital raise remains an overhang. 

"We also see limited ROA expansion as core PPOP to assets ratio remains range bound. We believe the risk reward is balanced at current valuation levels and in our view, there is limited upside from here," it said.

UBS said tax rebate in the Union Budget and likely implementation of eighth pay commission recommendations are incrementally positive for SBI customers. It sees improved liquidity (Rs 80,000 crore surplus as of March end against peak deficit of Rs 3.3 lakh crore), income tax rebate and eighth pay commission recommendations to boost loan and deposit growth. 

"We raise our EPS estimates by c3-5 per cent but believe limited upside to SBI's core PPOP to assets ratio (1.5 per cent vs 2.8-3 per cent for private peers) will cap any material re-rating. We upgrade to Neutral from Sell as we see a balanced risk reward," it said.

UBS has raised its loan growth estimates by 100 basis points for FY26 and FY27 to 14 per cent. It also expects SBI's cost of deposits to come down slightly as liquidity becomes surplus. 

"Relatively lower share of EBLR at 40 per cent (45-60 per cent for private peers) would cushion NIM pressure, in a rate cut cycle. We believe corporate asset quality will stay benign in the near term supporting low credit costs, while we are closely watching trends in unsecured retail loans," it said.