Why are brokerages bullish and raising price targets on SBI?

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State Bank of India is a public sector bank and is the largest bank in the country, with a balance sheet of Rs. 48 lakh crore. It has the best-operating metrics in the PSU banking space. Its key surprises were healthy performance on the asset quality front and revenue growth. 

This asset quality has been impeccable since the last decade, as shown by fewer restructuring, falling slippages, stable margins, and improved asset return. Slippage is when a standard asset becomes a non-performing asset. And brokerages expect this positive performance to continue in the coming quarters.In December 2021, SBI reported its gross NPA as a percentage of gross advance at 4.5%, a net decline of over 40 basis points sequentially. Plus, its net NPA slid over 18 basis points to 1.34%.

ICICIdirect’s report mentioned, “The SBI Bank share price posted a strong performance on the asset quality front wherein slippage and restructuring were within guidance while sufficient provisioning buffer provided comfort. Business growth was in line with estimates while profitability was boosted by a sharp jump in the other income.”

What should investors do with the stock?

SBI shares have surged over double the times in the past five years. Brokerages believe this overall strength in liability franchisee, around 9% guidance on growth, and improving return on equity should be a plus for the bank. ICICIdirect has a ‘buy’ call on the stock with a target price of Rs. 650. It values the bank at 1.22 times the forward estimates of FY24 adjusted book value and subsidiaries at Rs. 192 per share. 

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The brokerage believes a strong performance on the asset quality front, a healthy pipeline to help business growth, healthy provisions, and an improving trajectory can drive SBI Bank share price performance. If the growth continues, it leads to an improvement in the stock’s valuations.

Key triggers for SBI share price

Based on the updates and reports ofICICIdirect, the following are the key triggers for SBI share: 

  1. A strong performance on the asset quality front
  2. A healthy pipeline will help the business grow and lead to an overall positive performance
  3. Additional provisions worth over 1% that can quickly provide comfort even from earnings shock
  4. The improving return on equity will aid improvement in valuations

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