SBI share price target, earnings estimates raised by Jefferies

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Global brokerage Jefferies boosted State Bank of India (SBI) earnings by 3-5% and target price (TP) to 700 to account for better credit growth, as it is well positioned to gain domestic credit share and is seeing improved overseas growth. Even though net interest margin (NIM) may be constrained as corporate credit share increases, healthy credit growth and low borrowing costs will support earnings growth and improved ROA, a- he added.

“The bank needs to raise its capital, but instead of a primary issue, mgt can monetize the stake in the subs,” the note said. Jefferies maintained the buy rating on SBI shares with a target price of 700 (from 630).

SBI is well positioned to benefit from the recovery in bank credit growth with a recovery in the corporate segment – ​​locally and overseas. A combination of better economic activity, inflation and bond market share gains has pushed banks’ corporate credit growth up 500 to 700 basis points since March 22, which, combined with strong retail credit growth, brought overall bank credit growth to +15%, brokerage highlighted.

“SBI, as a major corporate lender, also saw a strong recovery here, with credit growth improving to 15% in 1QFY23 from 11% in March 22. Its overseas credit growth also reached 22 % in 1QFY23 and may improve further with increased activity in syndication (overseas customers), roll-out of factoring business and an increase in trade credit; INR depreciation boosts growth by 6 to 8 ppt. Accordingly, we are increasing the estimates for credit growth and revenue growth for FY23-24,” Jefferies added.

The bank could seek to monetize part of the stakes in listed subsidiaries such as SBI Life Insurance (the bank owns 56%) and SBI Cards (the bank owns 69%). If SBI reduces the stake to 52%, the value of the sale of the stake may increase the capital adequacy ratio by 70-80bps. The bank may also seek to list some unlisted franchises like SBI General and SBI AMC, so we see less chance of that happening in the immediate future. Valuations, however, are attractive, with value finding in the card and insurance subsidiary, he said.

The opinions and recommendations made above are those of individual analysts or brokerage firms, and not of Mint.

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