On 25 April 2024, shares of Kotak Mahindra Bank crashed 10% following the Reserve Bank of India's (RBI) strict action against the private lender.
Kotak Mahindra Bank has around 10% weightage in the Bank Nifty sector.
In the past, any instance of such a huge fall has resulted in the entire pack of banking stocks following the victim and leading the entire index lower.
But this time, it was different.
At a time when Kotak Bank shares experienced a fall of 10%, the Bank Nifty index ended higher.
And leading the charge was none other than India's largest bank State Bank of India (SBI).
Shares of SBI rallied over 5% yesterday and offset the losses set by other top banking counterparts.
Let's find out why SBI share price is rising and what lies ahead for the PSU lender.
The primary reason why SBI shares rallied over 5% in yesterday's trading session was due to optimism building up ahead of PSU banks' earnings announcement.
The street is expecting these banks to post steady performance in the near to medium term on the back of stable asset quality outlook.
For the March quarter (Q4FY24), PSU banks could report better earnings growth than private peers, led by lower credit cost.
For SBI, the company's profitability has been on a steady rise for several quarters.
The lender is comfortably placed in terms of growth capital. Opportunities for lending in promising sectors under PLI scheme and renewables as well as electric mobility are being explored by SBI to diversify its portfolio.
The PSU lender has posted healthy growth over the past 5 years.
Rs m, consolidated | FY19 | FY20 | FY21 | FY22 | FY23 |
---|---|---|---|---|---|
Total Income | 3,306,874 | 3,680,106 | 3,853,379 | 4,069,731 | 4,733,781 |
Growth (%) | 8% | 11% | 5% | 6% | 16% |
Net Profit | 22,996 | 197,678 | 224,055 | 353,739 | 556,482 |
Net Margin (%) | 1% | 5% | 6% | 9% | 12% |
ROA (%) | 0.1 | 0.5 | 0.5 | 0.7 | 1.0 |
ROE (%) | 1.5 | 8.3 | 10.1 | 13.6 | 18.4 |
Dividend (Rs) | 0.0 | 0.0 | 4.0 | 7.1 | 11.3 |
Cost Income Ratio | 65.7 | 63.7 | 65.6 | 69.5 | 67.0 |
In the current bullish scenario, SBI is well placed to ride the massive surge in PSU valuations.
Massive capex plans by both government and corporates for the coming decade have been laid out. So, banks like SBI may have to accelerate their disbursals to meet demand.
In the past, the largest public sector banks were known to accumulate huge non-performing loans at peak of every capex cycle. The PSU corporate customers somehow never managed to honour the loans as the cycle turned.
But this time things are different.
The PSU banks have cleansed their books. So not only are the NPA levels lower but their balance sheets are geared to lend for capex.
SBI, has particularly seen a flood of new account openings in the past decade thanks to Jan Dhan Yojana.
Hence the bank is armed with one of the largest low-cost deposit bases among Indian banks. It can compete with private sector peers in retail lending.
SBI's net NPAs are currently at a decadal low. This makes the bank less vulnerable to even the upturn in interest rates.
In the past 5 days, SBI share price has surged 7%.
In 2024 so far, the stock is up 26%.
SBI has a 52-week high of Rs 817 touched on 26 April 2024 and a 52-week low of Rs 543 touched on 26 October 2023.
In the past one year, SBI has rallied 42%.
Here's a table comparing SBI with its peers -
Company | SBI | Bank of India | Canara Bank | Indian Bank | PNB |
---|---|---|---|---|---|
ROE (%) | 18.4 | 7.5 | 16.4 | 12.9 | 3.3 |
ROCE (%) | 12.5 | 9.4 | 14.8 | 11.2 | 5.8 |
Latest EPS (Rs) | 71.5 | 14.1 | 80.8 | 56.8 | 6.9 |
TTM PE (x) | 11.4 | 10.1 | 7.4 | 9.2 | 19.2 |
TTM Price to book (x) | 1.9 | 1.1 | 1.3 | 1.3 | 1.5 |
Dividend yield (%) | 1.4 | 1.4 | 2.0 | 1.7 | 0.5 |
Industry PE | 12.1 | ||||
Industry PB | 1.7 |
State Bank of India (SBI) is an Indian multinational public sector banking and financial services institution.
It provides a wide range of products and services to individuals commercial enterprises large corporate public bodies and institutional customers.
The bank operates in four business segments namely treasury banking, corporate/ wholesale Banking, retail Banking and other banking Business.
SBI provides a range of banking products through their vast network of branches in India and Overseas including products aimed at NRIs.
For more details about the company, you can have a look at SBI factsheet and latest quarterly results on our website.
You can also compare SBI with its peers:
And to know what's moving the Indian stock markets today, check out the most recent share market updates here.
Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...
Yash Vora is a financial writer with the Microcap Millionaires team at Equitymaster. He has followed the stock markets right from his early college days. So, Yash has a keen eye for the big market movers. His clear and crisp writeups offer sharp insights on market moving stocks, fund flows, economic data and IPOs. When not looking at stocks, Yash loves a game of table tennis or chess.
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