UBS raises State Bank of India stock to neutral, target to INR840

On Thursday, UBS analyst Vishal Goyal upgraded State Bank of India (NSE:SBI) (SBIN:IN) stock from Sell to Neutral and increased the price target to INR840.00, up from INR760.00. Goyal cited the stock’s underperformance relative to the BankNIFTY and changes in regulatory stance on liquidity and risk as factors limiting the downside. The recent tax rebate announced in the budget and the likely implementation of the eighth pay commission recommendations were highlighted as incremental positives for State Bank of India’s customers.

Goyal expects improved liquidity, with a surplus of INR800 billion as of the end of March compared to a peak deficit of INR3.3 trillion, along with the income tax rebate and pay commission recommendations to stimulate loan and deposit growth. These factors led to a raise in the firm’s earnings per share (EPS) estimates for State Bank of India by approximately 3%-5%.

Despite the positive outlook, Goyal believes that the limited upside to State Bank of India’s core pre-provision operating profit (PPOP) to assets ratio, which stands at approximately 1.5% versus 2.8%-3.0% for its private peers, will cap any significant re-rating of the stock. The stock is currently trading at 1.0 times its projected September 2026 price-to-book value (P/BV), which is around 0.5 standard deviations above the 5-year average.

Goyal’s upgrade to Neutral reflects a balanced risk-reward perspective for State Bank of India shares. He also pointed out that a key risk to the stock could be greater competitive intensity and the bank’s relatively low Common Equity Tier 1 (CET1) ratio, which is about 11% compared to 17.5% and 16% for HDFC Bank and ICICI Bank, respectively.

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