After 22% YTD gains, this bank stock can offer up to 15% further returns

After gaining 22 per cent on a year-to-date basis, ICICI Direct is betting on State Bank of India (SBI) with a target price of Rs 650. This, given the last traded price, shall offer potential return of around 15 per cent.

The stock interestingly is just 2.75 per cent away from its 52-week high of Rs 578.5, hit on Thursday.

On the lender, the brokerage maintained that “a recent decline in yields is expected to lead to a reversal in treasury losses and could act as a near term catalyst. Thus, we maintain our BUY rating on the stock and revise our target price to Rs 650, valuing core bank at 1.3x FY24 ABV and assigning Rs 192 to the subsidiaries”.

Further about the lender, the brokerage’s report highlighted that SBI enjoys a balance sheet size of more than Rs 50 lakh crore with strong retail portfolios as well as best operating metrics with the space. Also, the bank has registered significant improvement in its asset quality together with a healthy Provisioning coverage ratio (PCR).

Also, as for the future outlook, the brokerage mentions that the bank’s margin shall remain supported by a higher share of floating rate loans. Also, there are expected MTM reversals in coming quarters.

Furthermore, on the loan portfolio, the bank has logged 14.9 per cent growth in the Q1 period of FY 2023 on a YoY basis. Also, the deposits and CASA ratio marked improvement.

“Asset quality showed a sequential improvement with 6 bps and 2 bps QoQ decline in GNPA and NNPA to 3.9% and 1.0%, respectively. Slippages for the quarter inched up to Rs 9740 crore versus Rs| 2845 crore (QoQ) while recoveries & upgrades were at Rs 5,208 crore vs Rs 6,756 crore (QoQ).

So given this backdrop, ICICI Direct has chosen SBI as its top pick from the space. Other banking scrips selected as the brokerage’s top bets are Axis Bank (target price-Rs 970) and City Union Bank (target price -Rs 215).

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)