Macquarie maintains underperform on SBI: Can you still buy PSU bank's shares?

Shares of SBI will be in focus in Tuesday's session (March 11, 2025) as global brokerage Macquarie continued with its earlier underperform rating on the stock with the target at Rs 700. The set target implies a downside of 4 per cent from the previous close.

The stock marked its all-time high price on June 3, 2024 of Rs 912, and since then has declined over 20 per cent in less than a year's time amid overall weak market momentum.

SBI shares amid an improving overall market sentiment ended higher for the past 5 sessions except the last one, gaining as much as 6 per cent since February 28, 2025. However, the stock also marked its fresh 52-week low price on March 3 of Rs 679.65 per share.

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Also Read: Should you buy SBI shares for long term now?

Brokerage calls on SBI

Ventura Securirtties in its latest report on SBI has suggested buying the PSU lender for a period of 2 years and a target at Rs 1,049, implying potential gains of 44 per cent from the previous close.

"Since our initiating coverage in FY24, the share price of State Bank of India (SBI) has increased by 17.8%, driven by strong growth in the bank’s net income, which rose by 21.6% to INR 61,077 cr. Additionally, a significant improvement in asset quality is evident from the enhancements in its GNPA/NNPA ratios by 52/10 bps during the year, bringing them down to 2.23% and 0.57%, respectively. This growth was achieved despite tight liquidity conditions and a slowdown in deposit growth, which led to an increase in the cost of funds," it noted in its report.

Rationale for a buy on SBI

Over FY24–FY27E, we forecast for SBI to deliver a robust financial performance, with AUM growing at a CAGR of 12.4% to INR 52,61,250 cr. During the same period, the bank’s deposits are projected to increase at a CAGR of 13.5% to INR 71,93,787 cr, with a CASA ratio of around 39%. Interest income is forecast to rise from INR 4,15,131 cr to INR 5,94,131 cr (a CAGR of 12.7%), while NIMs are expected to moderate to approximately 2.8% from around 3% in FY24.

Additionally, PPoP/Net Profit are anticipated to increase from INR 93,797/ 61,077 cr, respectively, to INR 1,48,743/92,641 cr (representing CAGRs of 16.6% /14.9%, respectively). Asset quality should improve at a measured pace, with GNPA/NNPA ratios declining by 64/15 bps to 1.59%/0.42% over the same period. The provision coverage ratio (PCR) is likely to remain near its current level of roughly 74%. Business Model: Interest income from loans and advances, supported by noninterest income from fees, commissions, and treasury operations.

Valuation Call: We initiate coverage with a BUY rating and a SOTP price target of INR 1,049 (1.5X FY27E P/BV), representing an upside of 51% from the CMP of INR 697 over the next 24 months.

Risks to Estimates: 1. Slower-than-anticipated economic growth, 2. A sharp rise in interest costs, and 3. Potential deterioration in asset quality.