SBI stock top pick in PSU banking space, driven by attractive valuations: Expert says

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State Bank of India (SBI) remains a compelling investment in the public sector undertaking (PSU) banking space, driven by attractive valuations, significant monetisable assets, and robust operational performance. Speaking with CNBC TV18, Parag Thakkar, Senior Fund Manager, Fort Capital, highlighted several factors that reinforce his confidence in the nation's largest lender.

From a valuation perspective, Thakkar noted that SBI stock currently trades at approximately 1.1 times its price-to-book value. He emphasised that the market often overlooks the substantial value of its subsidiaries, which he estimates at ₹300 per share. While SBI Life and SBI Cards are already listed, he pointed to significant hidden value in unlisted entities. Specifically, he mentioned SBI's stake in the National Stock Exchange (NSE), valued at around ₹50,000 crore, along with the upcoming listings of SBI Mutual Fund and SBI General Insurance, which represent immediate monetisation opportunities.

Looking ahead, the expert projects an FY27 book value of ₹585 for SBI, suggesting the stock is trading close to 1x price-to-book multiple. This is particularly attractive as the bank's Return on Assets (ROA) has now surpassed the 1% mark.

The bank's recent performance further strengthens the investment case. In the last quarter, SBI reported an expansion in its Net Interest Margin (NIM), supported by an 18% growth in low-cost current account deposits and a strong 25% increase in fee income. Thakkar described its credit cost, which is below 50 basis points on a massive loan book of ₹44 lakh crore, as "amazing."

Reflecting a positive outlook on the back of pro-growth government and Reserve Bank of India (RBI) policies, SBI has revised its credit growth guidance upwards from 11-12% to a range of 12-14%. Thakkar described the bank as a "pure play leverage play on India's economy," which is poised to perform well, citing an average GDP growth of around 7-7.5%.

Furthermore, he relayed the confidence of SBI's chairman, who stated that the guidance for a 3% NIM by the end of March 2026 remains intact, even in the event of a 25 basis point interest rate cut. This stability is expected to be managed through continued growth in current account accretion and fee income.

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