Motilal Oswal Recommends This Banking Stock To Buy For 28% Return, Robust Digital Growth Beating The Pandemic

Brokerage firm Motilal Oswal has given a buy call to the stocks of State Bank of India (SBI), for a 28% return, in 1 year. With a digital boom, the bank's around 62% savings accounts opened in 1HFY22, were though the YONO platform, it opened 27.5k savings accounts daily in 2QFY22.

Target Price

The Current Market Price (CMP) of SBI is Rs. 528. Motilal Oswal has estimated a Target Price for the stock at Rs. 675. Hence this company is expected to give a 28% return, in 1 year.

Stock Outlook
Current Market Price (CMP)	Rs. 528
Target Price	Rs. 675
1 year returns	28.00%

 

Company performance

 

SBI reported a steady quarter, with net earnings growing 67% YoY to Rs. 76.3b (15% beat), aided by controlled provisions, as asset quality showed remarkable strength, despite the impact of the second Covid wave. SBI reported a 2QFY22 PAT of Rs. 76.3b (up 67% YoY; 15% beat to MOSLe), led by strong NII and controlled provisions, that grew 11%, YoY boosted by a tax refund of Rs. 19.92b. Domestic NIM improved by 35bp QoQ to 3.5%. GNPA/NNPA ratios improved by 42bp/25bp QoQ to 4.9%/1.5% as fresh slippage subsided to Rs. 41.8b (66bp annualized). The restructured book remained in check at 1.2% of loans, while the SMA pool declined sharply to Rs. 66.9b (27bp of loans), Motilal Oswal reported.

Comments by Motilal Oswal

Motilal Oswal said, "SBI reported a robust performance as it bravely fought off the Covid-19 impact and displayed remarkable resilience in asset quality performance. The bank has been reporting continued traction in earnings, led by controlled provisions. However, business trends remain modest, impacted by continued deleveraging by corporates. We expect the slippage trajectory to moderate further (assuming there is no third COVID wave), while credit cost may undershoot the normal cyclical trends, though we are conservatively keeping credit cost at 1-1.1%." Additionally, the bank created a family pension provision of Rs. 74.2b, instead of amortizing it over five years.

About the company

SBI, the biggest nationalized bank of India, is a Fortune 500 company. SBI, the largest Indian Bank with 1/4th market share, serves over 45 crore customers through its vast network of over 22,000 branches, 62617 ATMs/ADWMs, 71,968 BC outlets.

Disclaimer

The above stock was picked from the brokerage report of Motilal Oswal. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.