Buy State Bank of India Ltd For Target Rs.1,240 By Geojit Financial Services Ltd
Broad-based Credit Growth Continues
State Bank of India (SBI) is India’s largest bank, with a vast network of branches globally. Through its subsidiaries, SBI offers a diverse range of financial services, including insurance, credit cards and asset management.
* Interest income grew 8.4% YoY to Rs. 127,896cr, driven by broad-based advances across retail, agri, small and medium enterprises (SME), corporate and foreign offices; interest expenses rose 5.2% YoY to Rs. 80,904cr
*Therefore, NII (net interest income) rose 14.4% YoY to Rs. 46,992cr and domestic NIM (net interest margin) stood at 3.00% in Q1FY27 versus 3.01% in Q1FY26, supported by lower cost of deposits at 4.85% versus 5.21%.
* Pre-provision operating profit increased 9.8% YoY to Rs. 33,529cr, led by a 6.3% increase in total income.
* Reported PAT (profit after tax) grew 10.2% YoY to Rs. 21,121cr, driven by higher operating profit and stable provisions.
* ROA (return on assets) remained stable at 1.15% YoY in Q1FY27, while ROE (return on equity) declined to 18.63% from 19.68% in Q1FY26, driven by a higher equity base post the QIP (qualified institutional placement) dilution.
Outlook & Valuation
SBI delivered a strong performance driven by robust NII growth and broad-based credit expansion, with longer-term support expected from digital initiatives and collection capabilities. Management guided healthy credit growth anchored on nominal GDP expectations with a stable NIM outlook for FY27. Initiatives such as MSME Dream, YONO enhancements and M&A lending opportunities should continue to support growth. Further, potential value unlocking from subsidiaries may enhance shareholder value, while preparedness for ECL implementation could strengthen risk-management capabilities. The new collections vertical could improve penetration in self-employed segments and potentially enhance yields over time. Hence, we upgrade our rating on the stock to BUY from HOLD, with a revised target price of Rs. 1,240, based on the SOTP valuation.
Key Concall Highlights
* Total deposits increased 9.73% YoY to Rs. 6,005,805cr, with current accounts rising 4.02% YoY to Rs. 334,649cr and savings accounts increasing 10.27% YoY to Rs. 1,926,277cr, resulting in CASA (current and savings accounts) deposits growing 9.30% YoY to Rs. 22,60,926cr, with CASA ratio at 39.24% as of June 2026.
* Domestic advances increased 18.15% YoY to Rs. 4,276,648cr as of June 2026, driven by broad-based credit growth across retail personal (+15.15% YoY), agri (+25.43% YoY), SME (+22.33% YoY) and corporate (+18.05% YoY).
* As of June 2026, SBI's asset quality improved with the GNPA (gross non-performing asset) ratio declined to 1.47% from 1.83% in Q1FY26 and the NNPA (net non-performing asset) ratio reducing to 0.38% from 0.47%, while the PCR (provision coverage ratio) including AUCA (advance under collection account) stood at 91.82% and credit cost declined to 0.27% from 0.47%. * Management guided credit growth of 14%–15% for FY27, anchored on nominal GDP expectations of 12%–12.5%, with SBI historically growing 2%–3% above nominal GDP, and internal industry estimate of 15%–16%.
* The Chairman confirmed full-year NIM guidance of 3.00% for FY27, refusing to provide a quarterly outlook, indicating confidence in maintaining margins despite rate transmission pressures from Reserve Bank of India cuts.
For More Geojit Financial Services Ltd Disclaimer https://www.geojit.com/disclaimer
SEBI Registration Number: INH200000345
.jpg)
