The stock of the state-owned lender has outperformed the market in the past one month by surging 21 per cent after it reported another strong quarterly performance and showed further sequential improvement in assets quality and a rise in profitability in the March quarter (Q4FY21). In comparison, the S&P BSE Sensex was up 6.7 per cent during the period.
Amid a sharp rally in the market price of the bank's stock, its market capitalisation is now just 4 per cent away from the momentous Rs 4-trillion mark. At 09:45 am, the stock stock was up 1.7 per cent at Rs 431.35 with a market capitalisation of Rs 3.85 trillion, BSE data shows.
Most of the brokerages have maintained their 'buy' rating on SBI with a target price of up to Rs 650 per share. Analysts believe the overall outlook has improved with many positive levers like decline in credit cost, improvement in credit - deposit ratio and better yields due to less reversals. Thus, better margins could lift the bank's operational performance going-forward, they say.
"The bank has demonstrated solid performance in Q4FY21. Capital adequacy is well in-line with the risk of the loan portfolio. It is well positioned to deploy its excess liquidity into the credit growth as the market scenario improves. Hence, we reiterate our BUY rating on the stock, with a revised target price of Rs 510 using the SOTP methodology," analysts at Geojit Financial Services said in a result update.
Those at global brokerage CLSA, meanwhile, believe that SBI's FY21 pandemic performance has surprised positively and they see investors, especially foreign institutional investors (FIIs), interested in SBI post H2FY21 as "the strong performance is not a flash in the pan". The foreign brokerage house believes SBI is not just a value trade and relatively will do well on asset quality and it estimate ROEs to increase to 15 per cent by FY23CL. It has a target price of Rs 650 on the stock, which translates to neatly 50 per cent upside from current levels.
ICICI Securities, too, draws comfort from SBI's strong performance on the asset quality front wherein slippages and restructuring were within guidance with sufficient provisioning buffer in place.
"Amid Covid second wave business uncertainty, provision coverage ratio (PCR) at 71 per cent and standard provision at 1 per cent of loans gives immunity to the balance sheet and will boost profitability. While slippages from SME/agri books require close monitoring, credit cost is expected to remain below 2 per cent in next two fiscals while return on equity (RoE) is expected to improve to double digits over FY22-23E," according to analysts at Choice Broking.
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