SBI shares: State Bank of India gets thumbs up from stock analysts post Q2 results; here are target prices

State Bank of India (SBI) reported yet another quarter of consistent performance, with strong loan growth momentum, a pick up in deposits sequentially and no negative surprises on asset quality front, Banking analysts largely retained 'Buy' rating on the SBI stock as they noted that the PSU bank does not have a liability challenge, even with loan growth exceeding deposit growth. They expect net interest margins (NIMs) to be maintained at prevailing levels.  

Even if the policy rate is cut, with the recent MCLR hike of 30 bps, the impact on NIM shall be marginal, said Nuvama Institutional Equities as it retained its ‘Buy’ on SBI, with an unchanged target price of Rs 1,026.

Analysts said despite the mammoth size of the balance sheet, the PSU bank delivered strong business growth momentum in Q2 with advances growing at 15.3 per cent YoY and deposits reporting a healthy growth of 9.1 per cent YoY. The state-run bank remains confident of delivering loan growth in the guided range of 14-16 per cent for FY25; supported by broad based growth across segments in 2HFY25. It expects home loan growth rate to be around 13-14 per cent YoY and rebound in auto loan growth post muted growth in H1FY25.

"We have valued SBI’s standalone business at 1.5 times September 2026E ABV. Adding subsidiary value per share of Rs 246.40, we derive our target price of Rs 1,065 against Rs 1,059 earlier. Our target multiple is at a 13.7 per cent premium over the past 5-year average multiple of 1.3 times ABV," Nirmal Bang Institutional Equities said.

The brokerage is positive on SBI for the long-term, considering the bank’s leadership position in Corporate and Retail, ample liquidity on balance sheet and pristine asset quality.

Nomura India said SBI is among the best-placed in the sector amid asset quality, deposit, regulatory and rate-cut related challenges. It raised its FY25-27 EPS estimates by 4-7 per cent, due to lower opex and higher non-interest income in Q2. 

"Current valuations for the core bank at 1.1 times FY26F P/BV (7 times P/E) are attractive for 19-16 per cent RoEs (and 15-14 per cent loan growth) over FY25-27F. SBI stays a top pick for us," it said.

MOFSL said SBI's quarterly results were driven by robust treasury income and steady net interest income (NII).

Margins moderated 8 basis points sequentially, but the bank expects NIM to be maintained at current levels, supported by levers such as CD ratio and MCLR repricing.

"Credit growth was healthy while the unsecured book (Xpress Credit) saw continued moderation. Deposit growth was healthy after a sluggish 1Q though moderation in the CASA mix continues. The bank has seen a reduction in its domestic CD ratio to 67.9 per cent. Fresh slippages and credit cost were contained, which underscores the improvement in underwriting standards and enabled further reduction in NPA ratios," MOFSL said.

This brokerage suggested a buy and a target price of Rs 1,000 on the stock.

SBI's restructured book was well in control at 0.38 per cent of advances but the SMA pool saw a significant increase to 36 bps of loans against 12 bps of loans in Q1, driven by PSU accounts.

"SBI's strong showing underscores the effectiveness of its strategies and adaptability in a challenging banking environment. Despite concerns surrounding unsecured retail loans, the bank has improved its non-performing asset (NPA) ratios, reflecting a positive trend in asset quality. SBI's consistent performance across key financial metrics, coupled with a solid asset base, enhances its capacity to navigate economic fluctuations," said Manish Chowdhury, Head of Research, Stoxbox.

Looking ahead, the bank's continued success will hinge on its ability to manage operational costs, monitor margin trends, and further enhance asset quality, Chowdhury said.

SBI shares are up 31 per cent year-to-date. The SBI stock is up 45 per cent in the past one year.