Bullish Nirmal Bang on this public sector bank; sees more than 35% increase

Nirmal Bang is bullish on public lender State Bank of India (SBI) and has maintained a “Buy” rating with a target price of Rs 626 per share. So if you compare it with the current market price, the stock has more than 35% upside potential.

The brokerage firm noted that asset quality continued to improve, with declining NPA QoQs and satisfactory performance on accounts emerging from the moratorium. Additionally, the cost of credit for FY22 came in at 94 basis points and the bank would like to contain it to less than 100 basis points going forward.

The certificate opened a little higher at Rs 468.40 against the previous close of Rs 467.35. With a market capitalization of over Rs 4,10,000 crore, the shares are above the 5-day moving averages but below the 20-day, 50-day, 100-day and 200-day moving averages.

Nirmal Bang highlighted that key operating metrics were strong, with an overall loan portfolio growing 11.6% year-on-year and 6% quarter-on-quarter. Retail and corporate both saw healthy and sustainable traction as market demand picked up.

“In the wholesale segment, recovering utilization levels bode well from a growth perspective. NIM was stable QoQ at 3.12%. margins on a positive trajectory going forward,” he added.

India’s largest public sector lender reported a 41.2% increase in its standalone net profit to Rs 9,113.53 crore for the fourth quarter ended March 2022. The lender had recorded a net profit of Rs 6,450.75 crore during the previous year period. With that, the bank posted its highest quarterly net profit in Q4FY22.

Net profit for the year FY22 increased by 55.19% year-on-year to Rs 31,676 crore. On the asset quality front, the bank’s gross NPA ratio fell 101 basis points yoy to 3.97%, while the net NPA ratio fell 48 basis points yoy to 1 .02%.

Recently, SBI increased the marginal cost of lending rate (MCLR) by 10 basis points (bps). The upward revision to MCLR rates took effect on May 15, resulting in higher interest rates for auto and personal loans, according to the SBI website.

In line with the recent revision, the MCLR has been increased from 6.75% to 6.85% on overnight, one month and three month durations. The MCLR for a six-month term was raised from 7.05% to 7.15%.

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