SBI Shares: IIFL believes the bank’s stock has a lot of room to grow

The themes of increased productivity, higher digital adoption, and sustainable and inclusive growth are central to the State Bank of India’s (SBI) annual report, according to domestic brokerage and research firm IIFL.

SBI, aided by an improved macroeconomic environment, returned to double-digit loan growth after FY19, with the infrastructure sector accounting for about 10% of incremental growth in FY22.

“Corporate RoA (PBT) saw sharp expansion and the overall RoA improvement was driven by decadal-low credit costs. SBI is showing strong momentum across segments and stress loans are very well provided. ROA/ROE is likely to be healthy at 0.9/18% over FY23-25ii, mainly driven by lower operating expenses and some further moderation in credit costs,” the note stated.

The brokerage firm has maintained its Buy rating on SBI stock, with a target price of Rs 620, representing a potential upside of more than 37% from current levels.

For the quarter ending March 2022, India’s largest bank recorded a 41% increase in standalone net profit to Rs 9,113.5 crore, its greatest quarterly profit ever. In the previous quarter, the lender made a profit of Rs 6,450.7 crore.

SBI’s net interest income (NII), which is the difference between interest generated and interest expended, increased by 15% to Rs 31,198 crore in Q4FY22 from Rs 27,067 crore the previous quarter (YoY). Domestic net interest margin (NIM) grew by 29 basis points year over year to 3.40 percent in Q4FY22.

The asset quality of the public lender improved, with gross non-performing assets (NPAs) falling to 3.97 percent of total assets from 4.50 percent in the previous quarter, and net NPAs falling to 1.02 percent from 1.34 percent (QoQ). The entire provision for contingencies, including bad loans, was 7,237 crore, up from 6,974 crore in the previous quarter and 11,051 crore in the previous year (YoY).