On September 17, 2025, State Bank of India (SBI), the country’s largest lender, reaped hefty gains from an emergency rescue mission. It was possibly forced on it by the Government, which wished to prevent a banking panic. In March 2020, SBI paid `10 per share to buy a 49 per cent stake in Yes Bank, an ailing private bank that was on the brink of a complete collapse. Well, there was no option. The private bank had to be saved, the banking system needed to survive. SBI, being the Government’s banker, had to step in.
Almost 66 months later, India’s largest bank sold a minor 13.18 per cent of Yes Bank to Japan’s Sumitomo Mitsui Banking Corporation for more than twice the price. Earlier too, SBI got rid of the shares in piecemeal fashion, and now own just over 10 per cent in Yes Bank. According to media reports, the windfall may ensure that SBI remains India’s most profitable company in the July-September quarter. It topped the June quarter chart with a post-tax profit of `19,160 crore, comfortably ahead of Reliance Industries’ `17,904 crore.
“Banks aspire to keep cost-to-income ratio below 50 per cent through the cycle. The Yes Bank stake sale offer is locked in at `21.5/share (compared to purchase price of `10). This is a binding contract and the period has not lapsed yet,” states a report by ICICI Securities. SBI’s stock price bumped a few notches on the day the deal was announced. In fact, since August 29 this year, the share price has zoomed by over 8.5 per cent in four weeks. The rise is much higher, at nearly 13 per cent, in the past six months.
SBI delivered a decent quarterly performance, supported by healthy broad-based loan growth, and improved profitability. This was on the back of strong operating efficiency, amid high provision expense in a seasonally weak quarter. According to PL Capital, the bank’s asset quality remains strong, as net slippages were 20 basis points lower at 49 basis points despite Q1 generally seeing more stress. The Net Interest Income was `410.7 billion, while the Net Interest Margin was weaker at 2.76 per cent compared to PL Capital estimates. Loans grew 11.9 per cent year-on-year and deposits rose 11.7 per cent. Overall, PAT (Profit After Tax) came in at `191.6 billion.
According to LKP Securities, the bank’s management maintains its guidance of credit growth to be 12-13 per cent in FY26, supported by the corporate segment with a pipeline of Rs 7 trillion. The bank remains confident in maintaining RoA (Return on Assets) and RoE (return on Equity) levels above one per cent and 15 per cent, respectively.
While the growth in express credit cards is muted, SBI plans to grow the unsecured personal loan segment, especially among Government employees. The bank expects continued robust growth in home loans. Gold loans, which have turned into a fad due to continuous rise in gold prices, are being pursued as an opportunistic growth area, driven by market demand and price increases.
“The bank believes that the cost of deposits has peaked at 5.2 per cent (five per cent in Q1-FY25), while slight increase is expected due to customers locking in fixed deposits,” states a recent report by LKP Securities. Like a few others, SBI Research has recently urged the central bank to cut interest rates due to benign retail inflation, and GST 2.0 that will keep prices suppressed. There is merit in a rate cut because the impact of the American tariffs is showing in the country’s economic activity. Others have urged caution, and status quo.
According to Emkay Securities, on the corporate front the bank expects recovery momentum to continue, leading to a steady decline in NPAs (Non-Performing Assets), and thus lower credit cost. “The bank projects credit growth of ~12 per cent (with an upward bias), led by corporate credit growth at 10-11 per cent, and MSME (mid-level and small-scale units) growth at 19-20 per cent,” it adds.
However, the Net Interest Margin is likely to be U-shaped, moderating in Q1 and Q2, before improving, as deposit repricing and CRR (Cash Reserve Ratio) benefits aid margins. Some of the brokerages expect a margin of three per cent in FY26. The bak seems optimistic about the future growth trajectory, which will be led by a revamped digital offering, and demand revival due to the ongoing festive season and tax benefits. “Personal gold loan growth jumped 79 per cent Year-on-year (up 27 per cent Quarter-on-Quarter), though (it was) off a low base. Share of personal gold loans has now reached 1.5 per cent versus 1.2 per cent in Q4-FY25, and 0.9 per cent in Q1-FY25,” according to a report by ICICI Securities.
“SBI is well-positioned to capitalise on improving macro conditions. Hence, we reiterate our BUY rating… with a Sum-of-the-Parts (SOTP)-based target price of ` 908,” states a report by LKP Securities. “While most banks surprised negatively on core earnings for Q1-FY26, SBI delivered superior results. (Hence) we keep… SOTP-based TP (Target Price) at `960,” states a report by PL capital. The current price is around `870.
