SBI stock: Antique Stock Broking said the dilution concern is overdone as strong internal accrual is adding to CET 1 and should be sufficient for 12–13 percent loan growth estimates.State Bank of India Ltd. (SBI), the worst-performing constituent of Nifty Bank in 2024 so far, is attractively valued, said analysts who retained their 'Buy' recommendations on the stock despite the recent increase in risk weights on unsecured retail loans by the Reserve Bank of India. An increase in risk weights can hurt SBI's common equity tier 1 (CET 1) by 55–60 basis points, coming down to 10.4–10.5 percent, Antique Stock Broking said on Monday.
Despite this, Antique Stock Broking said the dilution concern is overdone as strong internal accrual is adding to CET 1 and should be sufficient for 12–13 percent loan growth estimates. The brokerage said subsidiaries’ stake sales over a period could add 0.8–1.3 percent to CET 1. It is hoped that the government may consider infusing capital over the next two years.
SBI shares climbed 0.52 percent to hit a high of Rs 566.10 on BSE.
"On financials, unsecured personal loan growth has already moderated to 18 percent YoY, and further moderation would not have a high impact on overall loan growth. As the incremental contribution to growth has come down, the impact on NIM may also be low. The track record of asset quality has been strong, and management is confident about the portfolio quality; even if we consider a 200-bps credit cost rise in unsecured loans, the impact on overall credit cost would be 16-bps," Antique Stock Broking said.
The brokerage, which has an unchanged target of Rs 725 on the SBI stock, said the current event is unlikely to change the structural strength of the bank and the return on asset (RoA) expectation of 0.9–1 percent.
The PSU bank stock has fallen 8.16 percent this calendar year against a 0.6 percent rise in the banking benchmark during the same period.
B&K Securities noted that SBI raised equity capital in FY13, FY16, and FY18 and that the bank's Tier 1' capitals in the years prior to FY13, FY16, and FY18 were 9.5 percent, 9.6 percent, and 10.4 percent, respectively.
Including H1FY24 numbers, it said SBI's Tier I capital stood at 12.8 percent, and the RBI measures could erode the CET I by 85 basis points.
"It appears that there is no imminent requirement to raise core capital now," it said. Nomura India and Jefferies have retained their 'Buy' ratings on SBI. Out of a total of 39 analyst recommendations on the stock, 31 are'strong 'buy', four 'buy', two 'hold, and two'sell' and strong ''sell' calls. As per publicly available data with Trendlyne, the stock has a target of Rs 706, suggesting a 25 percent potential upside.