Buy State Bank of India; target of Rs 675 : Motilal Oswal

The research firm ICICI Securities believes earnings of apparel brands and retail companies under their coverage may surprise positively from Q3FY22E as the likely demand recovery may result in better than expected margin performance. Some of the costs savings achieved during pandemic may sustain and coupled with high operating leverage may lead to higher than pre-covid margins from Q3FY22E.  Stocks like Trent, V-Mart and Aditya Birla Fashion and Retail are the preferred picks backed by their strong and consistent track record of execution.

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26 Aug, 2025 12:21

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Motilal Oswal's research report on State Bank of India

SBIN continues to strengthen its Balance Sheet and improve its return ratios. The management's focus has been on building a granular, high-quality loan portfolio, while maintaining a strong focus on underwriting, which has aided a sustained turnaround in operating performance. SBIN remains well positioned to withstand MTM losses in its treasury portfolio as the rate environment hardens further. Retail growth is likely to remain strong. This, along with a pick-up in the SME and Corporate book (as the un-utilized limit continues to moderate to 40% v/s 53% a couple of quarters ago), will support loan growth. Improving margin, deployment of surplus liquidity, and reversal in the rate cycle (as ~70% of loans are floating in nature) will enable a recovery in NII. We estimate NII to grow at 12% CAGR over FY22-24, led by ~11% loan book CAGR over FY22-24. On the digital front, YONO continues to set new records with ~80m downloads and more than 45m registered users, with average daily logins of ~10m. SBIN has a leadership position with a market share of 14.5% in POS terminals, 27.7% in Debit Card spends, and 23.2% in mobile banking (by value). Asset quality has been resilient over the past few quarters, aided by improved underwriting and significant mobilization in customer engagement by the recovery team. PCR has improved to 71% (89% in the Corporate book). This, coupled with controlled restructuring (1.2%) and a low SMA book (0.2%), will drive a sustained reduction in credit cost (below its long-term average).

Outlook

SBIN has reported a RoE (calculated) of ~12.7% in 3QFY22 - the highest since AQR commenced in FY16 - and appears well positioned to surpass 15% RoE in the medium term. We maintain our Buy rating with a TP of INR675/share (1.3x FY24E ABV + INR210 from its subsidiaries).

More Info

At 16:01 hrs State Bank of India was quoting at Rs 490.35, up Rs 3.35, or 0.69 percent.

It has touched an intraday high of Rs 493.15 and an intraday low of Rs 486.75.

It was trading with volumes of 511,009 shares, compared to its five day average of 900,512 shares, a decrease of -43.25 percent.

In the previous trading session, the share closed down 0.74 percent or Rs 3.65 at Rs 487.00.

The share touched its 52-week high Rs 549.05 and 52-week low Rs 321.15 on 07 February, 2022 and 19 April, 2021, respectively.

Currently, it is trading 10.69 percent below its 52-week high and 52.69 percent above its 52-week low.

Market capitalisation stands at Rs 437,618.33 crore.

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