SBI shares: YES Bank, NSE value unlocking, other near-term triggers for PSU bank stock

State Bank of India (SBI) shares, which are trading closer to their 10-year average valuation multiple, could hit the Rs 1,000-mark going ahead, ICICI Securities said in its latest note. The domestic brokerage believes the PSU bank’s stock valuations should be seen in the context of market share gains, superior return ratios and lesser riskiness in the balance sheet, as it suggested a ‘Buy’ rating on the stock.

Value unlocking at YES Bank and NSE, where SBI has significant stakes, are near-term triggers for the public sector lender, ICICI Secuities said.

The SBI stock is trading at 1.15 times FY26 estimated core banking business, with subsidiaries valuing at Rs 263 per share. ICICI Securities said while SBI’s return on asset (RoA) may have peaked, the expected RoA for the next two years is almost double of its 10 years’ average, with less riskiness in the balance sheet.

“The valuation should also be seen in the context of the bank gaining credit market share for the next two years, and relatively strong positioning on LDR, LCR and regulatory retail. We also believe SBI could sustain its outperformance against private peers in unsecured retail, purely due to its predominant share of less-risky government employees,” it said.

Stable asset quality outcomes in Xpress credit and overall asset quality could allay concerns on any kitchen sinking associated with the change of guard, ICICI Securities said.

Media reports suggest NSE is one step closer to its IPO. SBI, along with SBI Capital, owns 7.6 per cent stake in NSE. Media reports also suggest YES Bank — SBI stake at 24 per cent, could also see strategic investor in the near term.

“Both these transactions, could help value unlocking/stake monetisation for SBI to 90 bps accretion of CET 1,” ICICI Securities said.

The brokerage sees the bank delivering RoE of 17 per cent in FY25 and 16 per cent in FY26 against 19 per cent in FY24. While there is moderation in RoE, it is still superior when compared with private peers.

“Despite lower RoA, comparable or superior RoE at SBI is driven by higher leverage at SBI. We believe a comparison on RoRWA would also be worthwhile as risk calibration has stepped-up at SBI in the last couple of years. The comparison on RoRWA vs peers, interestingly, shows that while SBI’s RoA is significantly lower than private peers, the differential on RoRWA is significantly lower, suggesting improved returns adjusted for risks,” ICICI Securities said.