ICICI Securities Recommends Buying State Bank of India with a Target Price of Rs 730

ICICI Securities has expressed a bullish outlook on State Bank of India (SBI), recommending a buy rating on the stock and setting a target price of Rs 730 in its research report dated October 2, 2023.

In their report, ICICI Securities highlights key takeaways from their meeting with Dinesh Khara, Chairman of SBI:

1. Quality Consciousness: SBI has adopted a more quality-conscious approach, with branch Key Result Areas (KRAs) now including a focus on return on risk-weighted assets (RoRWA) instead of solely top-line growth.
2. Credit Growth: SBI expects healthy credit growth of 13-14% YoY, with deposits growth slightly lower, resulting in an improved credit-to-deposit ratio.
3. Growth in SME and Retail: Despite increasing competition, SBI remains confident of achieving healthy growth in the Small and Medium-sized Enterprises (SME) and retail segments.
4. Net Interest Margin (NIM): Near-term NIM is expected to remain stable, with a possible 5-7 basis points dip quarter-on-quarter (QoQ).
5. Operating Expenses: SBI anticipates a slight increase in operating expenses due to a rise in wage bipartite provisions.
6. Asset Quality Improvement: The bank is committed to reducing Non-Performing Assets (NPAs) in the agriculture sector to single-digit levels.
7. Capital Augmentation: SBI plans to rely on internal accruals for capital augmentation.
8. Sustained Return on Assets (RoA): SBI aims to sustain the current RoA of approximately 1.2%, with pressure on operating expenses offset by improving fee income.

ICICI Securities maintains its ‘BUY’ rating on SBI with an unchanged Sum-of-the-Parts (SoTP) based target price of INR 730.

This research report provides valuable insights for investors interested in SBI, emphasizing the bank’s commitment to quality, healthy credit growth, and strategies for sustaining and improving financial performance.