In a bullish note following the FY25 earnings announcement, leading brokerage firm Motilal Oswal has reaffirmed State Bank of India (SBI) as its top pick in the public sector banking (PSB) space, projecting a target price of ₹925 per share.
This optimism comes on the back of record-breaking net profits, robust retail banking performance, digital dominance through YONO, and disciplined asset quality.
SBI Posts Highest Ever Annual Net Profit of ₹709 Billion in FY25
Retail profit surged 49%, while total advances grew 12% year-on-year
In FY25, SBI reported a net profit of ₹709 billion, the highest in its history. The bank has delivered a compound annual growth rate (CAGR) of 37% over the past four years.
Retail pre-tax profits jumped 49% year-on-year, while treasury income rose 9% to ₹176 billion. The bank’s overall loan book grew by 12%, highlighting its consistent business momentum.
Though the Net Interest Margin (NIM) declined by 30 basis points to 3.0%, primarily due to pressure on express credit growth and rising funding costs, SBI maintained a healthy domestic NIM of 3.15%.
Motilal Oswal Sets ₹925 Target Based on Asset Book and Subsidiary Valuation
Earnings expected to grow at 6% CAGR; RoE forecast at 15.9% by FY27
The brokerage has assigned a ₹925 target price based on 1.2x FY27E Asset Book Value (ABV) and a ₹245 per share valuation for subsidiaries.
Between FY25 and FY27, SBI is expected to see 6% earnings growth CAGR, with Return on Assets (RoA) at 1% and Return on Equity (RoE) around 15.9%.
Digital Push Pays Off as YONO Continues to Drive New Accounts
Over 88 million users registered; 64% of new savings accounts opened through YONO
SBI’s digital platform YONO has played a pivotal role in its customer acquisition strategy. As of FY25, over 88 million users were registered on the platform, with 64% of savings accounts opened digitally.
The bank has also onboarded more than 330,000 overseas customers via YONO and is now working on YONO 2.0, aimed at enhancing user experience further.
Asset Quality Strong, Credit Costs Expected to Remain Controlled
PCR at 74.4%, rising to 92.1% with technical write-offs included
SBI has maintained strong asset quality with Provision Coverage Ratio (PCR) at 74.4%, and an impressive 92.1% when technical write-offs are included.
The Restructured Portfolio remains minimal at just 0.3%, and the SMA pool is only 8 basis points, reflecting SBI’s conservative underwriting and risk controls. Motilal Oswal expects credit costs to remain around 50 bps going forward.
