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State Bank of India (SBI), the largest lender in the country, has delivered an impressive return of over 180% in the past three years. Despite trading at around Rs 512 as of March 24, 2023, which is a significant increase from the Rs 180 level it was trading at in March 2020, the bank's shares have fallen by over 23% from its 52-week high of Rs 629.65. SBI's performance has been overshadowed by its peers in the past year, with Bank of Baroda delivering a 51% return and Union Bank being the top gainer with a 65% return. PNB and Canara Bank have clocked 29% and 22% returns, respectively, in the same period.
Despite this, brokerages and experts remain bullish on the stock. Jefferies, a foreign brokerage firm, believes that Indian banks are currently undervalued and, in some cases, stocks are trading below levels during the height of the Covid-19 pandemic. SBI is one of its top bank stock picks.
Rohan Mehta, Founder and Portfolio Manager at Turtle Wealth, said that SBI is one of their top picks and one of the best value buys. He added that SBI has done 2-2.5 times better than HDFC Bank in the last two years, which is a clear indication that the value is getting merged, and it is a case of value migration and a turnaround story for SBI.
Motilal Oswal also believes that the global banking system has been facing challenges primarily due to liquidity issues rather than asset quality. SBI, the brokerage, does not see any significant challenges to the Indian banking system. They believe that there is an opportunity to pass on the MCLR hike, which should boost margin in the coming quarters. The quality of advances remains fairly under control, with a constant moderation in asset quality ratios. Slippages have been under control, and the bank does not expect any challenges.
On the technical charts, Aamar Deo Singh, Head Advisory at Angel One Ltd, said that SBI has witnessed a sharp correction this quarter, down by almost 17% to currently trade around 500 levels. Investors are advised to stay cautious, as technically, if the stock breaches the 500 mark consistently on the downside, there could be further correction in the stock. The ideal levels to accumulate would be in the zone of 460-470. On the upside, the stock needs to sustain above 560 for any resumption in an uptrend.
SBI's Q3 performance was impressive, with a 68% YoY jump in net profit at Rs 14,205.34 crore for the December quarter compared with Rs 8,431.88 crore in the same quarter last year. Net interest income (NII) for the quarter rose 24.05% YoY to Rs 38,069 crore from Rs 30,687 crore in the year-ago quarter. Net interest margin for the quarter came in at 3.69%, up 29 basis points. The PSU bank reported a NIM of 3.55% in September and 3.4% in the year-ago quarter.
