ICICI Securities Places The Largest Bank On 'Buy' List Due To Its Strong Performance

ICICI Securities is bullish on the State Bank of India (SBI) as the largest bank of the country has posted a strong quarter despite the sharp rise in operating expenses (opex). The brokerage firm feels that the bank's stock price will reach a target price of Rs 730 from the current levels and can give a good return on investment.

SBI is a public sector bank with a 23% market share by assets and a 25% share of the total loan and deposits market. SBI is the 49th largest bank in the world by total assets and ranked 221st in the Fortune Global 500 list of the world's biggest corporations of 2020, being the only Indian bank on the list.

Impressive Performance

The banking behemoth reported a strong quarter with Q4FY23 PAT at Rs 166.9 billion and annualised RoA at 1.23%, driven by strong business growth, NIM uptick, strong 'other incomes' and contained credit costs. Both loan and deposit growth was strong, rather better than expected, at ~4.6-5.0% QoQ while net slippages turned negative, as per ICICI Securities.

The brokerage firm highlighted that the bank has delivered 96bps RoA and 19.4% RoE for FY23. Despite strong gross advances growth (up 16% YoY), SBI has accreted 33bps CET-1 capital YoY to 10.27% led by strong profitability and intends to rely on internal accruals for envisaged credit growth.

It is noted that SBI has a strong retail franchise (both secured and unsecured loans) and is the key beneficiary of likely revival in corporate capex. It has an edge in the cost of deposits which, along with excess SLR and a favourable loan mix, should help sustain healthy NIMs.

Bright Prospects

The stock broking firm added, "With net NPAs at 67bps, minuscule RSA book (with ~30% PCR), and contained incremental net slippages, we estimate credit costs to remain benign (~50bps) for FY24E/FY25E."

It further mentioned in its research note that the bank sounded confident of manageable incremental ECL provisioning. "We estimate it to deliver strong RoA and RoE at 0.9% and approximately 16.5% respectively for FY24E with a marginal downtick in NIMs getting broadly offset by better treasury gains. Maintain BUY with the target price revised to Rs 730 (earlier: Rs 805), valuing the stock at ~1.3x FY25E ABV and Rs 197 per share of subsidiaries."

Scrip Movement

The latest market price of the SBI stock is trading 0.17% higher at Rs 575.10 on an intraday basis. In the last one year, the price has surged by 28.46% while in the last three years, it has soared by 276.25%.

Disclaimer

The stock has been picked up from the brokerage report of ICICI Securities. Greynium Information Technologies, the author and the brokerage firm are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.