CLSA’s revised 12-month target price of Rs 1,050 implies a 28% potential upside from current levels.
SBI’s sum-of-the-parts (SOTP) based target price of Rs 1,050 is based on a 1.4x FY27E price-to-book valuation and does not include the bank’s significant holdings in Yes Bank and NSE. CLSA flagged these as potential value unlocking triggers in the future.
The firm reiterated that even without these strategic assets being monetised or revalued, SBI’s core business justifies its current valuation target.
Strong operating metrics and consistent market share gains, are other reasons that back the brokerage firm’s view.
According to the brokerage, these stakes are not yet factored into SBI’s current valuation and could together be worth approximately US$7 billion, or 9% of the bank’s market capitalization.In its recent note, CLSA stated that SBI is entering a phase of potential re-rating. The bank has maintained a leading position in loan market share for the fourth consecutive year.Loan growth for SBI in FY25 remained higher than that of most private sector peers, exceeding industry growth by 100–200 basis points across key retail lending products like home and auto loans. CLSA highlighted that SBI’s strength in these segments was driven by strong customer demand and operational scale.
The brokerage also noted SBI’s consistent deposit performance. While overall deposit growth moderated to 9% in FY25 from 11% in FY24, SBI’s CASA ratio (current account and savings account) held up better than private banks, with a YoY decline of just 120 basis points, compared to 220–350 basis points seen across private sector peers. This relatively strong liability profile helped cushion the impact of tightening margins.
CLSA pointed out that while SBI’s net interest margin (NIM) performance was modest in FY25, the bank’s asset quality remained strong. SBI was among the few large banks that saw a decline in gross slippage ratio during the year.
On the profitability front, the brokerage expects SBI to deliver a return on assets (RoA) of around 1% and return on equity (ROE) of 14–15% by FY27. The firm’s ‘steady state’ valuation model is based on assumptions of normalised treasury gains, stable credit costs, and healthy recoveries of bad loans.
However, CLSA also acknowledged the presence of upside optionality in FY26, should SBI record higher-than-expected treasury gains and lower credit costs. Over the past one year, SBI’s book value per share rose 18%, but the stock price declined 6% over the same period.
The brokerage noted that this discrepancy provides valuation comfort, with SBI currently trading at 1x price-to-book and 7x FY27E earnings, excluding the value of subsidiaries.
CLSA’s update also referenced that SBI has delivered sector-leading performance across several operational fronts, not just among public sector banks but even in comparison to select private sector peers. The bank’s consistent market share gains, strong asset quality, and cost-efficient deposit base have helped maintain its competitive position.
The brokerage concluded by stating that SBI remains well-positioned to benefit from a combination of stable core business performance and valuation rerating opportunities tied to its strategic investments.
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(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
