1 min read.Updated: 06 Sep 2021, 11:55 AM ISTLivemint
Among PSU Banks, SBI remains the best play on a gradual recovery in the Indian economy, Motilal Oswal said in a note
India's oldest and largest lender State Bank of India's (SBI) focus on strengthening its balance sheet has enabled a sharp decline in gross non-performing assets (GNPAs) in FY21, declined by around 43% over the past three years, while PCR increased to 68% at present (85% PCR on the corporate book) from 40% four years back.
“Among PSU Banks, SBI remains the best play on a gradual recovery in the Indian economy, with a healthy PCR, Tier I of around 11.3%, strong liability franchise and improved core operating profit. While business trends were impacted by the lockdowns, loan growth is likely to recover gradually over FY22-23E," Siddhartha Khemka, Research Analyst at Motilal Oswal said.
SBI’s earnings in FY21 have been more than the sum of what it did in the preceding five years (FY16-20). "Its FY22E earnings will be close to the sum of the past six years (FY16-21). It appears well positioned to report strong uptick in earnings, led by normalization in credit cost. This, along with expected uptick in core operating performance, will further propel earnings growth," Motilal Oswal note added. The brokerage has maintained its Buy recommendation on the PSU stock with a target price of ₹600 per share.
It expects recovery trends to continue as the IBC process gathers pace after a long pause due to the COVID-19 outbreak.
Under Emkay's high conviction list, it is overweight on largecap SBI and has ‘Buy’ rating on the stock. Meanwhile, brokerage firm ICICI Direct has a ‘Buy’ rating on India's biggest bank with a target price of ₹483 with a time horizon of three months.
Shares of State Bank of India (SBI) have rallied over 107% in a year and has surged around 55% this year (year-to-date or YTD) alone.