State Bank of India (SBI) shares are projected to reach a new record high within the next year, with Axis Securities setting a target price of Rs 1280. The brokerage firm maintains a 'buy' recommendation, citing SBI's robust position to capitalize on India's accelerating economic growth.
Strong Performance Fuels Optimism
SBI delivered a strong performance in fiscal year 2026 (FY26), effectively balancing growth, profitability, and asset quality. This was achieved despite broader industry challenges like margin pressures and volatile treasury income. Axis Securities highlights SBI's dominant market franchise, improving operational efficiency, strong capital base, and increasing involvement in emerging sectors such as renewable energy, data centers, and semiconductors as key drivers for future growth.
Robust Credit Growth Across Segments
In FY26, SBI reported healthy credit growth of 17.2% year-on-year, driven by broad-based expansion. This momentum was evident across corporate, SME, agriculture, and retail lending segments. Notably, the SME sector led the growth at 21%, followed by agriculture at 20%, and corporate loans at 15%. Management has provided a credit growth guidance of 13-15% for FY27, anticipating continued strength in retail, agriculture, MSME (RAM) lending, and corporate advances.
The bank's diversified loan portfolio and significant market presence are expected to sustain this growth trajectory in the coming years.
Expanding Reach and Improving Asset Quality
With over 22,000 branches and one of the most extensive rural banking networks in India, SBI continues to strengthen its customer base. The bank aims to incrementally increase its market share by approximately 1% annually across various districts, leveraging its vast infrastructure and digital platforms. Enhanced cross-selling opportunities are also expected to boost fee income and deepen customer engagement.
SBI's balance sheet has shown significant improvement, with asset quality reaching historic highs in FY26. Gross non-performing assets (GNPA) and net non-performing assets (NNPA) declined to multi-decade lows of 1.49% and 0.39% respectively. The corporate loan book saw a notable reduction in GNPA to 0.88% from 1.49% a year prior. Prudent underwriting and controlled slippages have kept retail asset quality stable, with credit costs remaining low at 39 basis points and provision coverage healthy at nearly 75%.
Solid Capital Position and Future Value Unlocking
The bank further bolstered its capital base in FY26 by raising Rs 250 billion, resulting in a capital adequacy ratio (CRAR) of 15.4% and a Tier-1 ratio of 13.3%. This strong capital position is deemed sufficient by management to support substantial incremental loan growth, estimated at nearly Rs 12 trillion.
Additionally, SBI holds potential for value unlocking through the monetization of its stake in the National Stock Exchange (NSE) and the anticipated listing of SBI Asset Management Company. These initiatives could further enhance shareholder value and reinforce the bank's financial strength.
Consistent Profitability Outlook
Despite a moderating interest rate environment, SBI maintained domestic net interest margins (NIMs) at around 3% and achieved a return on assets (RoA) of 1.1% in FY26. Management is confident in sustaining an RoA of approximately 1% throughout the business cycle, supported by stable margins, growing fee income, operational leverage, disciplined liability management, and low credit costs. The transition to the Expected Credit Loss (ECL) framework is also anticipated to be smooth, without significant adverse impacts on growth or capital adequacy.
SBI enters FY27 with robust fundamentals, including strong capitalization, best-in-class asset quality, solid growth momentum, and increasing exposure to high-growth industries. Axis Securities projects a FY26-28 earnings trajectory with Credit, Deposit, NII, and Earnings Compound Annual Growth Rates (CAGRs) of 14%, 11%, 15%, and 9% respectively, while consistently maintaining an RoA of around 1%.