CLSA has updated its outlook on the State Bank of India (SBIN: IN), increasing the price target to INR1,075 from the previous INR1,000. The firm maintained the stock's Outperform rating, reflecting a positive view of the bank's recent performance.
The State Bank of India reported a stable quarter, with loan growth holding steady at 15%, mirroring the figures from the fiscal year 2024. The bank's net interest margin (NIM) remained consistent quarter-over-quarter at 3.2%, adjusting for one-time items, and showed a slight year-over-year decrease of approximately 0.12 percentage points.
Despite a rise in credit costs to 37 basis points from 15 basis points in the prior fiscal year, these figures are still below the usual run-rate levels.
The management of the State Bank of India anticipates maintaining a loan growth rate of 15% and preserving margins at the current levels for the fiscal year 2025. Operational expenses were reported to be lower than anticipated, and the bank has set a target to sustain a cost-to-income (C/I) ratio of 50%.
However, the bank did face challenges in the quarter, with a noticeable slowdown in deposit growth to 8% year-over-year and fee growth remaining in the mid-single digits.
In light of the lower operational expenses, CLSA has adjusted its profit after tax (PAT) estimates for the bank upwards by 2%-5%. Consequently, the firm has revised its sum-of-the-parts (SOTP)-based target price to INR1,075 while reiterating its Outperform recommendation for the bank's stock.
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