State Bank of India (NS:SBI) has delivered another strong quarterly performance, sustaining loan growth momentum and increasing deposit inflows, all while maintaining solid asset quality. Banking analysts are largely optimistic, keeping 'Buy' ratings on SBI as the state-owned giant manages to sidestep potential liability challenges even as loan growth surpasses deposit growth. Analysts expect the bank's net interest margins (NIMs) to remain steady, supported by a recent 30-basis-point hike in the marginal cost of funds-based lending rate (MCLR).
Nuvama Institutional Equities remains bullish on SBI, setting a target price of INR 1,026, and noted that any policy rate cuts should have a minimal impact on NIMs due to this recent rate adjustment. Despite SBI’s massive balance sheet, the bank demonstrated robust growth in the second quarter, with loans expanding by 15.3% year-over-year and deposits rising by 9.1%. The bank remains confident it will achieve its 14-16% loan growth target for FY25, with strong performance anticipated across various loan segments, including an expected 13-14% growth in home loans and a recovery in auto loans.
Valuation assessments reflect SBI’s robust market position. Factoring in its standalone business at 1.5 times September 2026 estimated adjusted book value (ABV) plus subsidiary value, analysts project a target price near INR 1,065, a premium over the five-year average multiple of 1.3 times ABV. With its leadership in both corporate and retail banking, ample liquidity, and high-quality assets, SBI is well-positioned for sustained long-term performance.
Nomura India increased its FY25-27 earnings per share estimates for SBI by 4-7%, attributing the adjustments to lower operating expenses and an uptick in non-interest income. With attractive core bank valuations at 1.1 times FY26 price-to-book and 7 times price-to-earnings, Nomura considers SBI a top pick, given its favorable return on equity (RoE) and loan growth expectations through FY27.
The bank's treasury income and net interest income (NII) have remained solid. Although margins saw a slight sequential dip of 8 basis points, SBI expects to maintain current NIM levels, supported by improved credit-deposit ratios and MCLR repricing.
With contained slippages, lower NPAs, and improved underwriting standards, SBI has demonstrated resilience and remains a prime choice for long-term investors even from the current valuation’s perspective.
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