Best placed among public sector banks
SBI is India’s largest commercial bank and holds ~20% market share in the banking sector. It has 24,017 branches in India along with 198 overseas branches spread over 37 countries. The bank has achieved consistent growth over the last 5 years (FY12-17) with a CAGR of 15% in total assets, 14% in total deposits, 13% in total advances and 7% in net interest income (NII).
Valuation: We believe that SBI is likely to be a major beneficiary of the economic recovery and is best positioned to capitalize on growth opportunities owing to its strong capital base coupled with relatively lower NPAs among public sector banks (PSBs). Further, stake sale in subsidiaries and disinvestment of non-core assets will provide a cushion to earnings. Therefore, we continue to remain positive on SBI and maintain ‘BUY’ rating on the stock with a target price Rs325 based on sum of the parts (SOTP) methodology where we value its standalone business at Rs272 (P/ABV of 1.4x for FY19E) and subsidiaries at Rs53 (holding company discount: 20%).
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