Shares of the State Bank of India (SBI) surged by more than 4%, reaching an all-time high of Rs. 675 each. This increase in share price pushed the bank’s market capitalization above Rs. 6 lakh crore. SBI now joins Life Insurance Corporation as the second public sector undertaking (PSU) company to achieve this significant milestone.
In addition to SBI and LIC, other companies like Reliance Industries, TCS, HDFC Bank, ICICI Bank, Infosys, and Bharti Airtel also have a market capitalization exceeding Rs. 6 lakh crore, according to BSE.
The rise in PSU bank stocks can be attributed to the recent announcement by Finance Minister Nirmala Sitharaman, who set the gross and net market borrowing for FY25 slightly lower than expected at Rs. 14.13 lakh crore and Rs. 11.75 lakh crore, respectively. Lower borrowing generally leads to lower bond yields, making existing bonds more valuable. This is expected to benefit public sector banks heavily invested in government bonds. Furthermore, the anticipation of the Reserve Bank of India maintaining the repo rate and the higher capital expenditure in the Budget is also supporting the performance of PSU banking stocks.
In its Q3 report, SBI revealed a 35.5% YoY decline in standalone net profit, amounting to Rs. 9,164 crore. However, the bank expects lower wage provisions at Rs. 5,400 crore for Q4 FY24. SBI’s gross non-performing assets (NPA) decreased to 2.42% from the 3.14% recorded YoY. Although the net interest income (NII) fell short of estimates at Rs. 39,815 crore compared to the expected Rs. 40,304 crore, the total interest earned in Q3 FY24 increased by 22% YoY to Rs. 1.05 lakh crore.
Following SBI’s Q3 results, Motilal Oswal raised its FY25 earnings per share estimates by 4.6%, foreseeing controlled credit costs after completing wage and pension provisioning in FY24. It predicts a return on assets (RoA) of 1.1% and return on equity (RoE) of 19.6% for FY25. Maintaining a ‘buy’ rating, Motilal Oswal set an unchanged target of Rs. 800 per share. Similarly, Phillip Capital retained its ‘buy’ rating on SBI and raised its target price to Rs. 720 per share from the previous price of Rs. 660.
