This PSB Has The Potential To Offer Up To 50% Return

SBI shares are once again in news and there has been given a buy today call given on the counter i.e. at price levels of Rs. 385-390 per share. In the long term, the share price of the PSU lender is expected to scale to Rs. 600, which is an over 50% run.

S&P's Saurabh Jain is of the view that SBI share price has been edging higher ever since the Budget 2021. This is owing to Narendra Modi's government's focus on the profitability of the PSUs. At various occasions, the government has made clear its intent that it is going to pare its stake in all loss making PSUs. Also, of late the bank has done well at the retail level, which is also a boost for the stock of the PSB lender. And the stock of SBI is in fact the preferred pick from the space.

Also, as per the Morgan Stanley report which has for the first time in 13 years initiated an holistic coverage on PSBs there is a case for bad loans moderating going forward for these lenders. Moreover their balance sheets have been improving. Moreover,three back to back quarters of good financial numbers for the PSBs have increased their appeal.

Talking in particular about the State Bank of India counter:

"SBI's performance has been strong with NIMs in spite of high liquidity sustaining at 20bps higher than FY20 levels and highest NIMs in last six years. Through the last 1-2 years SBI has cut its SA rates by 100bps and still sustained CASA ratio of 45%", said CLSA.

Also, it views that the current re-rating in the counter should continue and the counter of SBI remains a deep-value opportunity and lists out three reasons for the same:

1] SBI is among the biggest beneficiaries of the benign corporate credit cycle;

2] Unlike its peers SBI over the last decade has gained market share both in its deposit and loan portfolio.

3] ROAs of 90bps will be comparable to the FY10-14 cycle.

GoodReturns.in