SBI Share Price Target: Axis Securities has maintained BUY rating on State Bank of India (SBI) after the state-run lender strong numbers in the third quarter (Q3FY26).
Let's take a look at what Axis Securities has to say on SBI.
Recommendation Rationale
Broad-based Growth; Buoyancy to Continue: SBI’s management has revised its growth guidance upwards to 13-15% vs 12-14% earlier, supported by the broad-based growth trends visible so far. The RAM segment has seen continued healthy growth, while the corporate book has seen a decisive revival in growth and is expected to deliver a healthy double-digit growth going into Q4. Within the retail portfolio, the Xpress Credit segment was expected to deliver double-digit growth in Q3; however, it was impacted by a shift towards gold loans driven by better yields and higher gold prices, especially amongst the corporate salary borrowers. This switch resulted in moderate Xpress Credit (+6% YoY) growth despite healthy disbursement momentum.
The gold loan growth has been robust, with the management indicating that the gold loan LTV is comfortable, thereby offering a significant margin of safety, leaving enough headroom to factor in sharp price movements.
Furthermore, SBI’s market share in the SME segment ranges between 15-16% and the bank remains well-placed to benefit from the budgetary announcements towards MSMEs. Overall, the management remains upbeat on growth momentum sustaining, driven by Income Tax cuts, GST rate rationalisation, Trade Deals, and Budgetary push, with SBI well-positioned to capitalize on these opportunities.
Corporate Growth Revival Underway Supported by Multiple Levers: In Q3, SBI’s corporate portfolio delivered healthy growth of 13/8% YoY/QoQ and the management remains constructive on the corporate growth momentum persisting even in Q4 and beyond. The overall corporate pipeline stands at Rs 7.86 Tn. The management also indicated that SBI is actively involved in data centre financing, participating across projects where capacity creation is underway. Another sector contributing to strong growth momentum is green energy, wherein the bank’s portfolio has reached Rs 1 Tn, largely aided by renewable energy.
The bank sees incremental growth opportunities in REIT funding and M&A financing pursuant to regulatory guidelines being finalised, and steady traction in the metals and infrastructure sectors, and the power sector, including renewable energy projects.
Sector Outlook: Positive
Company Outlook: SBI’s performance has been the best amongst the larger banks, and the bank remains well-poised to sustain its performance, supported by the management’s focus on deepening its liability franchise, allocating capital to higher RoRWA assets, maintaining a resilient margin profile, and leveraging tech to drive operating efficiency. SBI has upgraded its credit growth guidance to 13-15%, driven by a strong corporate revival and resilient RAM momentum.
The bank’s ability to maintain margins given its disciplined risk-adjusted pricing and continued focus on retail, granular CASA deposits should enable SBI to maintain margins at >3% over the medium term. Strengthening the fee income profile along with controlled costs driven by operational efficiency, should support earnings growth. Moreover, asset quality remains at decadal best levels, with credit costs remaining benign, further extending support to earnings.
Thus, collectively, these levers should ensure a comfortable RoA delivery of 1%+ over FY26-28E. SBI remains our favoured pick amongst the larger banks.
Current Valuation: 1.5x Sep’27E ABV; Earlier Valuation: 1.4x FY27E ABV
Current Target Price: Rs 1,280/share; Earlier TP: Rs 1,135/share
Recommendation: We maintain our BUY recommendation on the stock.
Alternative BUY Ideas from our Coverage: Bank of Baroda (TP – Rs 360), ICICI Bank (TP – Rs 1,700), HDFC Bank (TP – Rs 1,190)
