Jefferies Reiterates ‘Buy’ on SBI, Projects 21% Upside on Strong Credit, Asset Quality

Global investment firm Jefferies has reaffirmed a bullish stance on State Bank of India (SBI), assigning a “buy” rating and a target price of ₹960 per share—implying a potential upside of 21 to 22 percent from current levels. The recommendation is rooted in the public sector bank’s strong credit outlook, healthy asset quality, and ability to maintain profitability despite macroeconomic headwinds. The firm’s outlook comes amid subdued Q1 economic activity and early signs of revival driven by monetary easing and fiscal policy tailwinds, positioning SBI to benefit from improved financial conditions in the coming quarters.

Economic Revival and Liquidity Buffers Bolster SBI’s Growth Prospects

Jefferies’ analysts project a 12 percent growth in advances and a 10 percent rise in deposits for SBI in FY26, driven by resilient demand across retail, agriculture, and corporate segments. The brokerage highlights that SBI’s liquidity position remains robust, providing it ample room to navigate near-term interest rate adjustments. Despite some margin compression risks due to expected RBI rate cuts, SBI’s Return on Assets (RoA) is forecasted to hold steady at 1 percent—underlining operational efficiency and cost discipline. Analysts also cite the impact of tax cuts and increased public spending as factors likely to boost credit offtake by the second half of FY26.

Highlights

• Jefferies sees 12% credit and 10% deposit growth for SBI in FY26.

• Liquidity buffers remain sufficient to handle near-term rate cut pressures.

• RoA expected to sustain at 1% despite margin headwinds.

• Economic rebound and fiscal support to accelerate credit demand in H2 FY26.

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SBI’s Q4FY25 Earnings Reflect Margin Pressures but Show Asset Quality Gains

SBI’s Q4FY25 results presented a mixed bag. Net profit declined by 10 percent year-on-year, weighed down by compression in net interest margins (NIMs), but net interest income (NII) rose 2.7 percent year-on-year to ₹42,775 crore, signaling core operational resilience. The decline in bottom-line profitability was partially attributed to increased provisioning and modest growth in fee-based income. However, analysts focused on the improvement in asset quality: the Gross NPA ratio declined to 1.82 percent from 2.07 percent sequentially, and the Net NPA dropped to 0.47 percent from 0.53 percent. This reflects better credit underwriting and post-COVID normalization across key loan segments.

Highlights

• Q4FY25 net profit declined 10% YoY, despite 2.7% rise in NII.

• NIM pressures persist but core income remains stable.

• GNPA improved to 1.82%; Net NPA declined to 0.47%.

• Lower stress asset formation signals improved underwriting quality.

Broader Analyst Consensus Remains Strongly Bullish on SBI

Jefferies’ optimism aligns with the broader market sentiment surrounding SBI stock. Out of 42 brokerages covering the bank, 34 maintain a “buy” rating, while only one analyst has issued a “sell” call. Geojit Financial Services has upgraded its view on SBI from “hold” to “buy,” revising its target price to ₹888. The brokerage emphasized that despite the headwinds from monetary easing, SBI’s credit growth trajectory is likely to remain intact due to its diversified loan book and stable liability franchise. Analysts also appreciate SBI’s consistent return on equity (RoE) delivery and continued improvement in operating efficiency.

Highlights

• 34 of 42 brokerages rate SBI as “buy”; only 1 “sell” recommendation.

• Geojit upgrades SBI with ₹888 target, citing credit resilience.

• Analysts cite stable RoE and diversified loan mix as strengths.

• Operating efficiency remains a key driver of sustained performance.

Short-Term Stock Performance Diverges from Long-Term Outlook

Despite robust fundamentals and favorable analyst commentary, SBI shares have underperformed recently. The stock has declined 1.5 percent over the past month, lagging the Nifty 50 index, which posted a 0.4 percent gain in the same period. Analysts attribute this to near-term investor caution ahead of anticipated rate cuts, which could impact net interest margins for banks. However, market strategists argue that the downside is limited, with policy accommodation and SBI’s granular loan book positioning it well to capture the next wave of credit expansion. Investors are advised to look beyond the short-term volatility and focus on structural tailwinds favoring India’s largest bank.

Highlights

• SBI shares fell 1.5% in one month vs. 0.4% Nifty 50 rise.

• Short-term underperformance linked to rate cut concerns.

• Analysts see limited downside and strong long-term triggers.

• Granular loan book and stable deposit base support resilience.

Stable Return Metrics and Expanding Customer Base Reinforce SBI’s Leadership

SBI’s large-scale presence, with over 22,000 branches and 47 crore customers, provides it with unparalleled distribution and deep penetration across both urban and rural India. This gives the bank a strong edge in sourcing low-cost deposits and building credit relationships across income tiers. Analysts at Jefferies emphasize that the bank’s stable return metrics—such as consistent RoA, improving RoE, and robust pre-provision operating profit (PPOP)—affirm its ability to weather cyclical slowdowns. The continued investment in technology, digital lending platforms, and risk controls further enhances SBI’s competitiveness against private sector rivals, making it a preferred play in India’s public sector banking universe.

Highlights

• SBI serves 47 crore customers via 22,000+ branches across India.

• Strong franchise aids in sourcing low-cost deposits and retail growth.

• Consistent RoA and RoE demonstrate operational strength.

• Tech investments and digital reach keep SBI ahead in public banking.