Macro risks might lead to valuation derating for SBI, says JM Financial

JM Financial believes that there could be de-rating of SBI's valuations due to macro risks. In view of recent market volatility, SBI gives the analysts confidence on the back of its strong liability franchise.

’s case for de-rating of valuations could only be due to , said domestic brokerage firm , as the state-owned lender’s valuations are partly driven by macro outlook for the Indian economy.

While maintaining a ‘buy’ call with a target price of Rs 1,050 on the stock, the domestic brokerage stated that the macro outlook of the economy currently looks in solid shape and that it feels SBI might need a re-rating only in case of any risk relapse or credit worries.

In view of recent market volatility, SBI gives the analysts confidence on the back of its strong liability franchise.

“SBI’s FY24 annual report reflects that the bank ticked all the right boxes on quality, growth and profitability. was a healthy 15.8% while picked up to 11.1% in a difficult liquidity environment (domestic CD ratio at comfortable 68.3%) while the bank managed to maintain CASA levels at a healthy 41.1%. All these reflecting in protection of the bank’s in an intensely competitive scenario,” states Sameer Bhise, analyst at JM Financial.

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Given improving credit demand (especially in the wholesale segment) and expected pickup in , JM Financial believes that SBI is set to deliver mid-teens in the near term. Most of the deposit repricing is in the base which is expected to alleviate the pressure on funding costs and asset pricing tweaks are likely to aid .

In the last one year, SBI has gained 40% on charts while increasing 34% in the last 6 months.

SBI shares were trading 3% higher on BSE at Rs 815.75 around 3 pm today.

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Source: Stocks-Markets-Economic Times