Market expert Parag Thakkar outlines a bullish case for State Bank of India, citing its attractive valuation at just over one-time price-to-book and a significant subsidiary value of ₹300 per share. He highlights the bank's revised credit growth guidance of 12-14%, strong operational metrics including NIM expansion, and a stable margin outlook.

SBI stock top pick in PSU banking space, driven by attractive valuations: Expert says

State Bank of India Remains a Compelling Investment

State Bank of India (SBI) continues to be a top choice for investors in the public sector undertaking (PSU) banking space. The bank's attractive valuations, significant monetisable assets, and robust operational performance make it a solid investment opportunity.

Valuation Perspective

SBI stock trades at approximately 1.1 times its price-to-book value.
The market often overlooks the substantial value of its subsidiaries, which is estimated at ₹300 per share.
Significant hidden value lies in unlisted entities, including SBI's stake in the National Stock Exchange (NSE), valued at around ₹50,000 crore.
The upcoming listings of SBI Mutual Fund and SBI General Insurance represent immediate monetisation opportunities.

Future Outlook

Parag Thakkar, Senior Fund Manager, Fort Capital, projects an FY27 book value of ₹585 for SBI, suggesting the stock is trading close to 1x price-to-book multiple.

Recent Performance

SBI reported an expansion in its Net Interest Margin (NIM), supported by an 18% growth in low-cost current account deposits and a strong 25% increase in fee income.
The bank's credit cost is below 50 basis points on a massive loan book of ₹44 lakh crore, described as "amazing" by Thakkar.

Policies and Outlook

Reflecting a positive outlook on the back of pro-growth government and Reserve Bank of India (RBI) policies, SBI has revised its credit growth guidance upwards from 11-12% to a range of 12-14%.

SBI is described as a "pure play leverage play on India's economy," which is poised to perform well, citing an average GDP growth of around 7-7.5%.
The bank's chairman has stated that the guidance for a 3% NIM by the end of March 2026 remains intact, even in the event of a 25 basis point interest rate cut.

Key Takeaways:

Attractive valuations and significant monetisable assets make SBI a compelling investment opportunity.
Robust operational performance, with a strong credit cost and growth in fee income.
Positive outlook on the back of pro-growth government and RBI policies.