Brokerage firm Motilal Oswal Financial Services has a 'buy' call on the stock of State Bank of India (SBI), with a target price of ₹600, implying a 35 percent upside from the current market price.
The brokerage firm is bullish on the bank's loan growth and expects it to maintain its FY22 momentum going ahead.
SBI delivered a strong FY22 propelled by steady business and revenue growth and controlled provisions. The management of the bank expects the momentum to remain healthy as utilization levels improve, while retail growth is likely to remain steady, said the brokerage firm.
Motilal Oswal believes a higher mix of floating loans and CASA mix will support margin in a rising interest rate environment.
"Asset quality performance has been strong and the outlook remains healthy as restructured book remains in control at 1.1 percent, while the SMA pool has declined further to 13bp of loans. We conservatively estimate credit cost to
moderate to 0.9 percnet, enabling 28 percent earnings CAGR over FY22-24. We thus expect SBI to deliver an RoA and RoE of 0.9 percent and 16.7 percent in FY24, respectively. SBI remains our top buy in the sector with a target price of ₹600 (premised on 1.2 times FY24E ABV + ₹195 from subsidiaries)," Motilal Oswal said.
SBI's annual report highlighted the strong progress that the bank is making in fortifying its balance sheet and restoring RoEs back to the longterm average of 15 percent. The focus remains on building a superior loan book, while maintaining strong underwriting as evident in its lower stressed assets and high PCR, the brokerage firm underscored.
Corporate segment reported nearly 5 times year-on-year (YoY) jump in PBT to ₹27,000 crore, underscoring the
structural improvement in corporate business. The segment thus contributed nearly 51 percent of total profits in FY22 against 17 percent in FY21. Retail PBT grew 33 percent YoY in FY22 against 48 percent YoY decline in FY21, adversely affected by pandemic-induced provisions, the brokerage firm highlighted.
On the digital front, YONO continued to set new records with nearly 11.2 crore downloads and nearly 4.8 crore registered users, along with average daily logins of some 1.66 crore as of FY22. SBI sanctioned 11.4 lakh digital loans worth ₹21,100 crore in FY22 and overall, 36 percent of its retail asset accounts and 63 percent of SA accounts were opened through YONO in FY22, Motilal Oswal observed.
Disclaimer: The views and recommendations made above are those of the broking firm and not of MintGenie.