SBI Likely To Benefit From The Systemic Uptick In Credit Demand

State Bank of India (SBI) is likely to benefit from the systemic uptick in credit demand, according to analysts at JM Financial Institutional Securities Ltd. This is led by corporate credit growth. JM Financial in a recent note stated that with increasing corporate demand and a potential capital expenditure upturn in FY24, SBI is one of the best players in the sector. SBI's loan growth is expected to outpace industry growth, which can be at 16% over FY22-24 for SBI.

Analysts noted in the report, "Deposits growth for SBI has lagged loan growth which is in line with industry trend and now as we enter a seasonally strong 2H along with a steady demand environment, we could see the race for deposits getting hotter; we believe SBI's liability strengths should continue to hold it in good stead partly also aided by low-CD ratio (70% as of 1Q23)."

Although SBI's share of retail loans in the last few quarters stood at 36% in Q1FY23 from 31% in FY20, an increase in the corporate credit share incrementally is likely, JM Financial mentioned. SBI's core fundamentals are showing strong footing and growth in systemic growth is expected to drive incremental re-rating for SBI's stock.

"Even at current valuations, the capital raise will be book value of equity per share (BVPS) accretive and thus we are not overtly concerned," the report added later.