Surging SBI by 2%: Three significant elements driving bullish sentiments toward the share
State Bank of India (SBI) has received a series of Buy ratings from Motilal Oswal, Nuvama, and JM Financial following its impressive Q1 FY2026 performance. These analysts are optimistic about SBI's future, despite margin pressures, due to its resilient business model, credit growth momentum, and improved profitability prospects.
The bank reported a 9.71% increase in consolidated net profit to ₹21,201 crore in Q1 FY2026. This growth was driven by strong treasury and forex gains, despite a slight contraction of net interest margin (NIM) by 0.33% to 3.02% due to RBI rate cuts and deposit repricing delays.
SBI's loan book grew 11.6% year-on-year, with domestic retail advances up 12.56%, corporate advances rising 5.7%, and overseas advances increasing 14% YoY. SBI's chairman expects a U-shaped trajectory for NIMs in FY26, aiming for a 3% NIM annually, indicating margin stabilization and improvement over time.
Analysts project SBI to sustain around 12-13% loan growth through FY26, driven by digital transformation initiatives like the YONO platform with 88 million users, and cost efficiencies reducing the cost-to-income ratio (targeted to fall to 51.6% by FY27). Projected return on equity (RoE) is around 15.9%, with earnings expected to grow at a 6% CAGR through FY27.
SBI maintains a strong capital position, with a consolidated common equity tier 1 (CET1) ratio improving to 11.1% in March 2025, supported by plans for capital raising and capital gains from strategic stake sales. The macroeconomic backdrop of steady Indian economic growth (around 6.4%-6.7% forecast for FY26) and improving domestic demand provide a supportive environment for SBI's credit expansion and profitability.
JM Financial has also issued a Buy rating on SBI, with a revised target price of Rs 950 per share, implying a potential upside of 18%. SBI's Q1 PAT growth was significantly higher than JM Financial's estimates, driving RoA/RoE to 1.1%/17%. The State Bank of India share price has increased by 2%.
The credit cost declined 18bps QoQ according to JM Financial, while SBI's Net Interest Margin (NIM) contracted 10 bps QoQ to 2.9%. Nuvama has reiterated a Buy rating for SBI with a target price of Rs 950 per share, implying a potential upside of almost 18% from current levels. The Bank's Core NIM remained flattish QoQ, which Nuvama believes is better than a steeper decline for all peers.
SBI's credit growth is at 12% YoY, and a robust credit pipeline is expected to support a healthy outlook for SBI over FY26. The management of SBI retained its FY26 guidance of 12% credit growth, 3% domestic NIM, and slippages below 0.6%. The PSU Bank's loan growth remained stable at 12% YoY, led by the home and international segments.
SBI's Q1 performance was led by strong treasury gains, controlled operating expenses, and in-line NII. Motilal Oswal raised the earnings estimate for FY26 and FY27 for SBI. SBI's NII declined 4% QoQ due to a 16bps QoQ decline in NIM to 2.65%.
JM Financial points out that SBI's asset quality remained stable with a decline in gross/net slippages and a stable SMA book on a YoY basis. Motilal Oswal expects a gradual recovery in SBI's NIM in FY26. JM Financial revised its FY26/FY27 EPS estimates higher by 2-3%. The unsecured Xpress Credit book of SBI remains flat.
Motilal Oswal estimates FY27 Return on Assets (RoA) and Return on Equity (RoE) for SBI at 1.1% and 15.5% respectively. This optimistic forecast underscores the analysts' confidence in SBI's ability to navigate through the current challenges and deliver strong returns for its investors.
- The optimistic analysts at Motilal Oswal, Nuvama, and JM Financial, buoyed by SBI's impressive Q1 FY2026 performance, believe the bank's resilient business model and credit growth momentum will sustain a U-shaped trajectory for its net interest margins (NIMs) in FY26, aiming for an annual 3% NIM.
- As SBI's Q1 PAT growth surpassed JM Financial's estimates, driving return on equity (RoE) to 15.9%, the firm has issued a Buy rating on SBI, with a revised target price of Rs 950 per share, indicating a potential upside of 18%.
- Analysts project that SBI will maintain a loan growth of around 12-13% through FY26, aided by digital transformation initiatives like the YONO platform and cost efficiencies, resulting in a targeted cost-to-income ratio of 51.6% by FY27.
- SBI's strong capital position, with a consolidated common equity tier 1 (CET1) ratio of 11.1%, will provide support for its financial performance, given the macroeconomic backdrop of steady Indian economic growth and improving domestic demand.
- SBI's Q1 performance, led by strong treasury gains, controlled operating expenses, and in-line NII, combined with its robust credit pipeline, paints a positive picture for the bank's investing prospects in the finance market, even with margin pressures, and makes it an attractive target for Defi and banking investors alike.
