Target: ₹1,050

CMP: ₹829.90

State Bank of India’s FY24 annual report reflects that the bank ticked all the right boxes on quality, growth and profitability. Loan growth was healthy 15.8 per cent while deposit growth picked up to 11.1 per cent in a difficult liquidity environment while the bank managed to maintain CASA levels at healthy 41.1 per cent.

All these reflecting in protection of the bank’s market share in an intensely competitive scenario. Credit cost declined to 23bps for the year (-27bps YoY, vs 187bps in FY20) and ROA crossed 1 per cent (1.05 per cent in FY24) mark after FY09 on annual basis. Although the one time impact of wage revision and provisions for pension liabilities resulted in higher opex (opex ratio at 2.02 per cent vs 1.87 per cent YoY), robust credit growth, relatively steady NIM (at 3.28 per cent vs 3.37 per cent YoY) and lower provisions resulted in healthy PAT growth (+ 22% YoY).

In terms of capital, CET1 ratio for SBI increased by 9bps YoY (at 10.36 per cent vs 10.27 per cent in FY23) despite increase in risk weights mandated by RBI in Nov’23, indicating adroit capital management. CAR for the standalone bank now stands at 14.25 per cent.

Given improving credit demand (especially in wholesale segment) and expected pickup in private capex, SBI is set to deliver mid -teens credit growth in the near term.

While the stock is trading at the upper end of the historical band (core bank trading at 1.02x FY26e P/BV), we believe the case for de-rating of valuations could only be due to macro risks or relapse of credit worries (which still remains a key discussion point for PSU banks). We maintain our Buy rating with TP of ₹1050.