LKP Research's research report on State Bank of India
State Bank of India (SBI) delivered a decent quarterly performance supported by healthy broad-based loan growth and improved profitability. This was on the back of strong operating efficiency amid high provision expense in a seasonally weak quarter. The bank’s NIM moderated on higher cost of deposits and is expected to remain range bound in the near term as deposit rates are expected to remain sticky despite recent repo rate cut. However, the impact of rate cut on margins is expected to be minimal due to its lower share of repo linked loans. Further, the bank’s asset quality continues to remain strong, in a challenging macro environment with effective collection efficiency and robust underwriting. With a continued focus on digital transformation, strategic provisioning buffers, and healthy capital levels, SBI is well-positioned to capitalize on improving macro conditions.
Outlook
Hence, we reiterate our BUY rating on the stock with a Sum-of-the-Parts (SOTP)-based target price of ₹908. This includes valuing the core bank at 1.3x FY27E BVPS, and attributing ₹119/share to its subsidiaries.
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