SBI returns to being Citi's preferred PSU banking pick with stock near 52-week high

Global brokerage firm Citi has reinstated its 'Buy' rating on State Bank of India

(SBI), India's largest lender, with a price target of ₹1,050 per share.

For financial years 2026 and 2027, Citi estimates loan growth of 13-14% year-on-year. It has factored in net interest margins (NIMs) on interest-earning assets (IEA) at 2.8-2.9%, along with a stable credit cost of 40-45 basis points (bps).

Based on these assumptions, Citi expects SBI to deliver a return on assets (ROA) of around 1% and a return on equity (ROE) of 14-15% during FY26-FY27E.

The brokerage added that SBI remains its top pick among public sector undertaking (PSU) banks.

Meanwhile, six state-run banks, including SBI, are likely to see passive inflows from MSCI indices if the foreign institutional investor (FII) limit in these lenders is raised to 26% from the current 20%.

SBI, where FII shareholding stands at 10%, could alone receive inflows worth $466 million, according to estimates by Nuvama Alternative.

On the earnings front, SBI reported its June quarter (Q1FY25) results on August 8. While profitability improved year-on-year, core income came in below expectations. The lender posted a net profit of ₹19,160 crore, aided largely by higher other income.

Net Interest Income (NII) or core income remained flat at ₹41,072.4 crore. Asset quality stayed stable, with gross non-performing assets (NPA) at 1.83% versus 1.82% in the previous quarter, and net NPA unchanged at 0.47%. Fresh slippages for the quarter rose to ₹7,945 crore from ₹4,222 crore in the preceding quarter.

Shares of SBI ended Wednesday's session 0.51% lower at ₹866.15, but remained close to their 52-week high, having gained 8% in the past month.