SBI joins Rs 5 trillion market cap club; stock surges 26% in three months

Public lender State Bank of India (SBI) hit the Rs 5-trillion-mark in market capitalisation (market cap) for the first time after its shares touched a record high of Rs 564.45, up 1 per cent on the BSE in intra-day trade on Wednesday in an otherwise weak market.

At 09:42 am, with a market cap of Rs 5.03 trillion, SBI stands at the seventh position in the overall market cap ranking of companies, according to the data from Bombay Stock Exchange (BSE). In comparison, the S&P BSE Sensex was down 0.85 per cent at 60,058.

SBI become the third lender in the country to cross the market cap of Rs 5 trillion. HDFC Bank, India’s largest private lender holds first rank in this list, with a market cap of Rs 8.38 trillion, followed by ICICI Bank has market cap of Rs 6.33 trillion, data shows.

In the past three months, SBI has outperformed the market surging 26 per cent, as against 13.9 per cent rise in the S&P BSE Sensex. ICICI Bank has rallied 32 per cent, while HDFC Bank gained 15 per cent during the same period.

SBI is the largest bank in India with a balance sheet size of over around Rs 54 trillion crore (as of March 2022). It has a healthy retail portfolio and best operating metrics among PSU banks. Its strong subsidiaries add value to the bank.

Analysts at ICICI Securities believe overall strength in lending franchise and liability growth >9 per cent guidance along with a well provisioned book remains positive. Prudent asset quality coupled with healthy provision coverage provides comfort on earnings trajectory. Unlocking of subsidiaries holds upside potential.

The brokerage firm believes asset quality trend should continue to improve as well and management commentaries have also indicated incremental stress will be lower.

“Momentum in credit growth and operational performance is expected to continue ahead. In FY23E, credit growth is likely to witness expansion. Firing up unsecured book to aid in initial quarters of FY23E; recovery in corporate credit offtake to revive credit growth from H2FY23. Gradual transmission of rate hike to offset rising competitive intensity on deposits. Deposit mobilisation and thus trend in CD ratio to be watched,” analysts said in banking sector Q1 earning wrap.

According to Canara Bank Securities, SBI has shown stellar operational performance and increased profitability despite provisioning. There is sharp fall in slippages percentage from 2.47 per cent in June 2021 to 0.99 per cent in March 2022. “We are very bullish on the stock in view of attractive valuation, strong distribution network to unleash huge Indian potential, adequate capital, improved asset quality, increased digitalization spends, normalizing macro conditions after easing Lockdown restrictions, and robust performance from subsidiaries,” the brokerage firm said in Q1 result update.

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