SBI Shares in Focus: CLSA backs country's largest lender as long-term compounder, sees more upside after recent rally

SBI Share Price Today: Brokerage firm CLSA has reiterated its ‘Outperform’ rating on State Bank of India, maintaining a price target of Rs 1,275 per share. The target suggests an upside potential of around 6 per cent from Wednesday’s closing levels. While the brokerage expects the stock to consolidate in the near term after a strong rally, it continues to see SBI as a long-term compounder within the Indian banking space.

SBI shares have delivered a sharp, largely one-way move over the past few weeks, particularly after the lender reported its third-quarter results earlier this month. Following the earnings announcement, the bank’s management raised its credit growth guidance to 13 per cent–15 per cent for the year, from 12 per cent–14 per cent earlier, reinforcing confidence in the growth outlook. The stock hit a fresh record high earlier this week before seeing some profit-taking over the last two sessions.

On Wednesday, SBI shares settled 1.96 per cent lower at Rs 1,199.30. As of February 26, the stock was trading around Rs 1,198.50 on the NSE, down marginally by about 0.13 per cent on the day.

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Larger scale, faster growth

Despite being the country’s largest lender by assets, SBI has managed to grow faster than the overall banking industry over the past five years, CLSA noted. Since the Covid period, the bank has effectively leveraged its extensive and previously under-utilised branch infrastructure to scale up its retail lending franchise. This strategy has helped SBI deepen its presence in segments such as home loans, personal loans and SME credit, driving consistent loan growth.

On the liability side, the brokerage pointed out that SBI has made meaningful progress in improving its funding profile. Over FY22–25, the bank has narrowed the gap in the cost of deposits with private sector peers such as Axis Bank and Kotak Mahindra Bank. This improvement reflects stronger deposit mobilisation, better mix and tighter pricing discipline, according to the brokerage.

Liquidity advantage supports margins

CLSA also highlighted SBI’s strong liquidity position as a key positive. The country's largest bank has high liquidity coverage ratio which provides two benefits: it basically helps SBI to grow loans faster than deposits while also offering support to margins. Also, this balance sheet flexibility gives the bank space to pursue growth opportunities without compromising on profitability, even in a competitive lending environment.

Robust stock performance

Despite the recent drop, SBI’s stock performance across has largely remained solid. In the past one month, the shares have risen nearly 14 per cent. The rally has been even sharper over a six-month period, with the stock rising about 48 per cent. On a year-to-date basis, SBI shares are up close to 22 per cent, underscoring sustained investor interest in the public sector banking major.

Market participants said the recent consolidation appears to be driven more by profit-taking after the rally rather than any fundamental concern. With improving asset quality, steady loan growth and a stronger balance sheet, brokerages remain largely constructive on SBI’s medium- to long-term prospects, even as near-term movements may stay range-bound.