Shares of State Bank of India (SBI) rallied over 6% to hit a new lifetime high of ₹718.80 in intraday trade on Thursday, while the public sector lender’s market capitalisation crossed ₹6 lakh crore. With this, the country’s largest lender becomes the second most valued PSU in terms of market cap, after Life Insurance Corporation (LIC) of India (₹7 lakh crore), and eighth among BSE-listed companies to boast m-cap over ₹6 lakh crore.

Early today, SBI shares opened higher for the third straight session at ₹680.10 against the previous closing price of ₹675.50 on the BSE. During the session so far, the PSU bank gained as much as 6.4% to hit a record high of ₹718.80, while the m-cap surged to ₹6.36 lakh crore. The counter witnessed a surge in volume, with more than 28 lakh shares changing hands over the counter, nearly twice the two-week average of 14.77 lakh. In the last three sessions, the banking heavyweight has gained nearly 12%.

The share price of SBI has gained 43% against its 52-week low of ₹510.85 touched on March 27, 2023. In the last year, SBI shares have risen 30%, while it added 24% in six months and nearly 14% in a month. In the last five months, the m-cap of SBI has increased by ₹1 lakh crore after it touched ₹5 lakh crore mark on September 14, 2023.

The recent rally in SBI shares, which is in sync with the Nifty PSU Bank index, can be attributed to its strong financial performance. The Nifty PSU Bank hit a fresh all-time high of 7,035 points today, logging a 24% gain in the last month, amid a sustained rally in all 12 listed state-owned banks. In the first half of the current fiscal (H1 FY24), the combined profit of PSU banks stood at ₹68,061 crore, a jump of 66% over H1FY23's profit of ₹40,991 crore.

SBI last week released its December quarter earnings, which showed that its standalone net profit declined 35% year-on-year (YoY) to ₹9,164 crore, dented by higher operating expenses. For the first nine months of FY24, the bank's profit stood at ₹40,378 crore, clocking 20.40% growth compared to the same period in the previous fiscal year.

The bank’s net interest income (NII) was at ₹39,815 crore in Q3 FY24, while the net interest margin of the lender stood at 3.22%.

On the asset quality front, the lender's gross non-performing asset (NPA) improved to 2.42% from 3.14% posted in the corresponding quarter last year. On the other hand, net NPA declined to 0.64% compared to 0.77% in the year-ago period.

Despite the decline in Q3 profit, analysts remain bullish on SBI shares and recommended “Buy” ratings. JM Financial and Axis Securities have given buy calls on the stock with price targets of ₹800, while LKP Securities has recommended a target price of ₹746.

Axis Securities in its report says SBI’s margins are expected to remain stable, aided by healthy growth. This, coupled with improving fee income profile and credit cost being under control, the brokerage expects SBI to continue delivering healthy RoA/RoE of 1%+/16%+ over the medium term.

JM Financial in its report says the lender’s core fundamentals continue to be stable while delivery on the growth front along with sustained margins and controlled credit costs should drive the rerating of the stock. The management expects Common Equity Tier 1 (CET1) to reach 11% by Mar’24 (from current levels of 9.1%), driven by strong profitability in FY24E (currently considering 9MFY24 PAT, CET-1 stands at 10.4%) while they also remain open to raising funds in case of strong growth going forward, it says.

Meanwhile, LKP Securities in its report says that under the base case scenario, the bank is expected to post a ROA/ROE of 1%/16.2% by FY25E, led by healthy balance sheet growth along with a higher provision coverage ratio and stable asset quality. 

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