The country's largest lender State Bank of India SBI shares will give 39% returns in a year, according to a report by financial services firm Motilal Oswal. The SBI stock gained 7% in the last year compared to a minor return of 0.92% in the 30 stock Sensex. BSE bankex and Bank Nifty have delivered 9.20% and 10.20% returns during the period. The state-backed lender has lagged behind its peers in returns in the past year.
Union Bank has returned 67.48% of its returns in a year, while Bank of Baroda has delivered 56.75% returns. The shares of PNB and Canara Bank have returned 33.47% and 10% in a year.
The SBI shares fell marginally to Rs 518.45 against the previous close of Rs 521.50 on the BSE today. The stock has fallen for the last two sessions. Since the beginning of this year, the SBI stock has lost 15.55 per cent. The bank's market cap was 4.63 lakh crore on the BSE. There were 0.43 lakh shares that changed hands with a turnover of Rs 2.20 crore on the BSE.
In terms of technicals, the relative strength index RSI of SBI stands at 41.4, signaling it is not trading in the overbought or oversold zone. SBI stock has a one-year beta of 1.1, indicating very high volatility during the period. SBI shares are trading lower than the 50 day, 20 day, 50 day, 100 day and 200 day moving averages.
Motilal Oswal sees an upside of 39% in the SBI stock with a target of 725. According to Trendlyne, the average target price of Rs 706 on the counter suggests a 35 per cent potential upside for the stock.
The global banking system has been facing challenges mainly due to liquidity issues rather than asset quality. The portfolio duration and concentration of loans under different categories have caused problems. The domestic banking system has remained relatively resilient thanks to active supervision and higher governance standards set by the RBI, according to the report.
Here is a look at three factors that are likely to push the SBI stock to new target of Rs 725.
The bank does not expect a capital raise in the near term, as it believes that the growth requirement will be met via internal accruals and Tier 1 bonds.
SBI has a strong pipeline of sanctions and its andisbursed term loans are falling 26% QoQ, which signals that the utilization is increasing. The growth environment has not yet been affected by higher interest rates. Mortgages have seen a sanction of 24% over 9 MFY 23, according to the report.
The bank does not expect any challenges going forward because of the gross non-performing assets ratio GNPA ratio in the retail segment, which is 0.67%, and the average loan to value LTV ratio is 55 - 60%. The LTV ratio is calculated by taking the loan amount and dividing it by the value of the asset or collateral being borrowed against. The credit cost remains at 50 bps, according to the report.