After moving at snail's pace for a year, is SBI set for a bull run?

SBI Share Price: State Bank of India shares are trading higher on Wednesday morning on BSE a day after the country's largest bank announced acquisition of a 20 per cent in SBI Pension Fund.
The SBI stock was trading 0.53 per cent higher, or Rs 3.20, at Rs 611.60 at 10:27 am on Wednesday. 

"We advise that the Executive Committee of the Central Board (ECCB) of the Bank has accorded final approval for acquiring 20% stake held by SBICAPS in SBIPFPL by SBI. (Meeting commenced at 1:30 pm. and concluded at 4:10 pm)," SBI said in a statement on Tuesday.

The cost of the acquisition is Rs 229.52 crore and it will be completed by December 15, 2023. 

After the 20 per cent acquisition, SBI's stake in SBI Pension Funds, which is held by SBI Capital Markets, has increased from 60 per cent to 80 per cent.

Brokerage view on SBI

In its November report, prominent brokerage Nirmal Bang maintained a 'buy' rating on the company, revising its share price target to Rs 709. 

The report says the bank is confident of clocking double-digit loan growth in FY24, in line with system credit growth.

The bank's key focus are SME, secured retail, agriculture, mid-corporate segments and financing EVs, solar power and green energy in the private sector, as per the report. 

Noirmal Bang further says, after adjusting for the 50bps impact of the RBI circular on higher risk weights and 109bps addition of 1HFY24 profit, the CET-1 remains comfortable at 10.5 per cent. It will hike its lending rates in the affected segments, in line with industry trend, the report says. 

As per its disclosures, while the bank has already slowed down on Xpress credit growth, after our observation of the NBFC & trading segment exposure from its Basel III disclosures (part of which is impacted by RBI circular) growing at 23.5% YoY, we are of the view that it may have to slow down a bit on lending to some NBFCs impacted by the circular.

Nirmal Bang tweaks earnings estimates for SBI

The brokerage has marginally tweaked its earnings estimates for SBI by 1.1per cent/3.4 per cent for FY24E/FY25E on assumption of 12 per cent loan growth in FY24E vs 13.1 per cent loan growth estimated earlier and 3bps decline in NIM in 3QFY24. 

Keeping its target valuation constant at 1.1x its Sept. 2025EABV and adding subsidiary valuation of Rs 198/share, it has revised target price (TP) from Rs 714 earlier to Rs 709.