Shares of State Bank of India gained 1.5 percent intraday Friday after brokerage Barclays raised target price to Rs 353 apiece from Rs 346, citing strong performance saving accounts and credit cards.
Shares of State Bank of India (SBI) gained 1.5 percent intraday Friday after brokerage Barclays raised target price to Rs 353 apiece from Rs 346, citing strong performance saving accounts and credit cards.
According to the brokerage, SBI is the only PSU bank to have gained saving accounts share over the last eight years and also only PSU bank with a significant credit cards business (11 percent share of spends) with customer spending patterns similar to private banks.
Barclays believes the country's largest lender has better staff productivity trends than other PSU banks. The key reason is its success in migrating transactions to alternative channels, it said.
SBIs alternative channel transaction volumes are 1.5 times larger than the other PSU banks combined, even though the other PSUs have twice the assets/CASA. SBI is the largest player in the 3 key alternative channels – ATMs, electronic and point-of-sales terminals and is growing rapidly in each.
Brokerage said SBI benefits from the government's new capital allocation approach and has a less capital intensive balance sheet.
However, the brokerage cut its earnings per share (EPS) for FY15 and FY16 by 1 percent and 6 percent, respectively as slower revenue growth and marginally higher provisions offset lower operating expenses.
According to the note, revenue pick-up would be greater than cost increases if loan growth picked up faster.
Key risk to its overweight rating is lumpy credit events of the bank, particularly in the steel and infra space. SBI's large corporate and infra exposures have grown rapidly since FY13. Further SBI has high steel exposures. However, the stock of un-provisioned problem assets at SBI is lower," it explained.
At 11:51 hours IST, the scrip of State Bank of India was quoting at Rs 284.55, up Rs 4.10, or 1.46 percent on the BSE.
Posted by Sunil Shankar Matkar
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