Jefferies lists SBI as its top buy idea within banking space; stock gains nearly 4%

Global brokerage Jefferies remains bullish on the countrry's leading lender State Bank of India (SBI) and has reiterated its buy stance on the counter. This is despite the stock's steady move in over a month.

At the last count, the shares of the lender ended at Rs 781 per share, while on the NSE it settled at Rs 780.9, down around 3 per cent. 

Nonetheless, in today's session after the global brokerage signals optimism the stock has gained nearly 2 per cent to the day's high price of Rs 795.6 per share. The stock's sharp gains come even when it has largely remained rangebound between Rs 790-800 per share in the last one month.

The brokerage mentionedn that the lender is focusing on improving deposit growth even as loan-to-deposit (LTD) ratio has room to rise. The metric helps to asses the bank's liquidity position by comparing its loans to its total deposits.  Also, Jefferies said the lender's asset quality is remaining steadu even in the unsecured loan category.

Jefferies in view of the prevailing dynamics noted that rate cuts may be gradual; higher share of marginal cost of funds-based lending rate (MCLR) will aid margins for the banker, while insulating NIM.

Also, it underscored that the bank doesn't plan to raise capital or monetise/ list stake in subsidiaries as of now.  c

The brokerage also added that the recoveries at the lender will also aid earnings going into the second half of the current fiscal year.

Takeaways from the lender's roadshow

The lender's management pointed to its plans to improve deposit growth and align incremental growth between loans & deposit.