SBI was trading higher for the sixth straight day, gaining 7 per cent, against 1.5 per cent rise in the S&P BSE Sensex during the same period. The stock has rallied 35 per cent in the past four months against 10 per cent rise in the benchmark index.
“SBI’s strong liability franchise and better capital position differentiate it from other PSU peers. Moreover, industry best cost of funds also helps lower asset side risks. Sharp decline in credit cost and improvement in margin are expected to drive improved RoAs over FY20E/21E,” Reliance Securities said in a client note.
Factoring in the benefits of likely stake sale in subsidiaries in FY20E and write-backs from some large NCLT (National Company Law Tribunal) recoveries, we expect RoA of 0.8 per cent/0.9 per cent in FY20E/FY21E,” the brokerage firm said with ‘buy’ rating on the stock and target price of Rs 390 per share.
Analysts at JP Morgan have ‘overweight’ rating on SBI with target price of Rs 400 per share, as the brokerage firm believes asset quality and provisioning cycle for SBI is now coming to a close.
“We think the bank’s core ROE will reflate from FY20 onward as the company crosses the “hump” on provisions and NPL recognition over FY19. With the large part of credit costs and operating costs behind it in FY19, SBI should start reverting to normalized profitability from FY20 onward, in our view, and the bank should hit the target ROA of 0.9-1 per cent over FY20-21,” the analysts said in May report.