Citi raises State Bank of India stock target to INR920

On Monday, Citi analysts initiated coverage on State Bank of India (NSE:SBI) (SBIN:IN) with a positive outlook, issuing a Buy rating and raising the price target to INR920.00, up from INR905.00. The bank’s performance in the fourth quarter, marked by flat net interest margins (NIMs) at 3.0% and a 4% quarter-over-quarter loan growth, was highlighted as encouraging by the analysts.

Despite these positive indicators, State Bank of India’s earnings were impacted by high provisions totaling Rs64.4 billion, which included loan loss provisions (LLP) and other provisions. However, several one-time items had a net favorable effect on the bank’s earnings. These included a profit on the revaluation of investments, with Rs38.5 billion from government-guaranteed security revaluations due to one significant resolution, foreign exchange income of Rs28.6 billion, which increased from Rs17 billion in the previous fiscal year, and dividend income of Rs16.4 billion.

Additionally, the bank benefited from provisions related to the Performance Linked Incentive (PLI) scheme, which involves industry-agreed incentives in staff costs and scheme-specific incentives for higher-grade employees, amounting to Rs13 billion in overhead costs. There was also a reversal of PLI provisions, contributing Rs7 billion to other provisions.

Citi analysts have adjusted their earnings estimates for the fiscal years 2026 and 2027, factoring in lower NIMs offset by higher non-interest income. They now expect the bank to deliver approximately 1.0% return on assets (RoA) and 15% return on equity (RoE) over the two fiscal years.

The bank has also passed a resolution approving the raising of equity up to Rs250 billion. With the bank’s book value expected to be higher in FY25 and a revised valuation of select subsidiaries, Citi analysts have adjusted their target price to INR920 from the previous INR905.

In other recent news, State Bank of India has been the focus of several analyst updates and financial assessments. The bank reported a third-quarter profit after tax of Rs 168.9 billion, surpassing UBS estimates, largely due to reduced credit costs. However, UBS maintained a Sell rating, citing concerns over the bank’s net interest income growth and declining treasury income. Meanwhile, Goldman Sachs upgraded the bank’s stock from Sell to Neutral, attributing the change to potential easing of pressures on net interest margins and favorable liquidity dynamics. Goldman Sachs also noted a steady core Pre-Provision Operating Profit Return on Assets, despite expectations of Return on Assets settling below 1% in the coming years.

Citi took a more optimistic view, upgrading State Bank of India’s stock from Sell to Buy and raising the price target to INR830. Citi’s Kunal Shah highlighted the bank’s focus on optimizing liability costs and the rebound in Xpress Credit growth as key factors for the upgrade. The bank’s efforts to contain unsecured retail slippages and manage credit costs were also noted positively. Additionally, Citi revised its earnings estimates for the fiscal years 2026 and 2027, citing attractive valuations and a return on assets of 1%. Despite differing perspectives, these developments underscore the varied analyst opinions on the bank’s financial outlook.

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