In this article, we can see SBI as a Potential Multibagger Stock as on June 2024.
SBI (State Bank of India)
SBI ( State Bank of India) is a Fortune 500 company. It is an Indian Multinational, Public Sector banking and financial services statutory body headquartered in Mumbai. It is the largest and oldest bank in India with over 200 years of history. State Bank of India is a Fortune 500 company. It is an Indian Multinational, Public Sector banking and financial services statutory body headquartered in Mumbai. It is the largest and oldest bank in India with over 200 years of history. Shri Dinesh Kumar Khara is the current Chairman. Shri Challa Sreenivasulu Sett is the current Managing Director.
Website of SBI
Location of SBI
SBI is headquartered in Mumbai. Presently, the bank operates a network of 22,219 branches and 62617 ATMs across India. It also operates 71,968 business correspondent outlets across India.
Products & Services
- Savings Accounts
- Salary Accounts
- Deposits
- Gov- Schemes
- Stocks & Securities
- Loans
- Cards
- Digital Banking
- Government Business
POSITIVES
- SBI had 6.07 Crore digital customers, 1.03 Crore daily logins , 45,000 registrations per day 5,50,000 daily average transactions.
- Bank have a presence across all time zones through 235 overseas offices in 29 countries and have established ourselves as the pioneer of International Banking among the Indian PSBs.
- During the year FY2023, Bank’s business grew at a faster pace than the banking industry, both in deposits and credit.
- In FY2023, the whole Bank deposits grew by 9.19% YoY to `44.23 Lakh Crore, of which domestic deposits increased by 8.50% to `42.53 Lakh Crore and foreign offices deposits by 29.60% to `1.70 Lakh Crore.
- Current account deposits grew by 7.47%, while saving bank deposits grew by 4.51%.
- Bank has opened 1.24 Crore Regular Savings Bank Accounts, of which 64% accounts were acquired digitally through YONO during FY2023.
- Bank’s gross advances grew by 15.99% to 32.69 Lakh Crore, compared to a growth of 11.0% in FY2022. While domestic advances grew by 15.38% to `27.76 Lakh Crore, foreign offices advances grew by 19.55% to `4.92 Lakh
Crore. - Bank’s domestic advances growth (15.38%) is higher than the banking industry’s growth of 15.0% in FY2023,led by robust growth in all the sectors.
- Bank’s investment portfolio increased by 6.3% to `15.87 Lakh Crore in FY2023, of which 96% are domestic investments.
- Bank has registered significant improvements on the asset quality front, provision coverage ratio, RoE/RoA, NII and NIM, while also giving highest standalone profit in FY2023 by any listed corporate, domestically.
- The Net Interest Income (NII) of Bank registered a robust growth of 19.99% over the previous year at
`1,44,841 Crore in FY2023 (`1,20,708 Crore in FY2022). - Bank has declared a dividend of D11.30 per equity share (i.e. 1130%) for the financial year ended March
31, 2023. - The operating profit of Bank during FY2023 stood at 83,713 Crore, marked improvement of 11.18% over
FY2022. - Return on Assets (RoA) for Q4 FY2023 stood at 1.23% signalling that the journey towards guidance of ROA of 1%+ was on track with continuous improvement in ROA from FY2020 onwards.
- Bank has one of the largest ATM networks in the country, with 65,627 ATMs, including Automated Deposit and Withdrawal Machines (ADWMs), as on March 31, 2023. On an average, 1.3 Crore transactions are recorded every day at SBI Bank’s ATMs/ADWMs and 5.66 Lakh cash deposit transactions at ADWMs.
- SBI has opened one India visa application centre at Khulna (Bangladesh) and 5 branches and 3 extension counters through its overseas subsidiary in Nepal.
- New digital products under development in collaboration with Fintech/ AA/ GST
Value Investing
- SBIN is good value based on its Price-To-Earnings Ratio (12x) compared to the peer average (17.5x) & Intrinsic Value Discount above 40%.
- SBIN exceeded the Indian Bank industry which returned 22.3% over the past year.
- SBIN’s earnings have grown significantly by 37.2% per year over the past 5 years.
- SBIN’s Assets to Equity ratio (15.6x) is moderate.
- SBIN’s Loans to Deposits ratio (76%) is appropriate.
Profit & Loss
| Mar-21 | Mar-22 | Mar-23 | CY | |
| Revenue | 278,115 | 289,973 | 350,845 | 439,189 |
| Interest | 156,010 | 156,194 | 189,981 | 259,736 |
| Expenses | 192,821 | 197,349 | 204,303 | 239,750 |
| Financing Profit | -70,715 | -63,570 | -43,439 | -60,297 |
| Financing Margin % | -25% | -22% | -12% | -14% |
| Other Income | 107,222 | 117,000 | 122,534 | 155,386 |
| Depreciation | 3,711 | 3,691 | 3,696 | 3,849 |
| Profit before tax | 32,796 | 49,739 | 75,399 | 91,240 |
| Tax % | 26% | 27% | 25% | 25% |
| Net Profit | 23,888 | 37,183 | 57,750 | 69,543 |
Negatives
- Credit risk is the probability of a financial loss resulting from a borrower’s failure to repay a loan
- Market risk refers to the risk of losses in the bank’s trading book due to changes in equity prices, interest rates, credit spreads, foreign-exchange rates, commodity prices, and other indicators whose values are set in a public market.
- Target price is lower than the current share price. Capitalization is so high to give super high mutlibagger returns.
- State Bank of India’s revenue is forecast to decline at 6.6% per annum. Customer Service have quality issues reported.
- SBI current net profit margins (20.5%) are lower than last year (21%).
- SBI has a high level of bad loans (2.2%). Any economic downturns can cause loan repayment risks.
- SBI earnings growth over the past year (20.6%) did not outperform the Banks industry 32.5%.
- SBI Return on Equity is forecast to be low in 3 years time (15.5%).
Warren Buffett Checklist
| Factor | Value |
| Economic Moat | Good |
| Growth | Good |
| Valuation | Moderate |
| Debt | Moderate |
| Integrity | Moderate |
Summary
The company has the potential to become multibagger in the order of 200-300% in 5-10 year term.
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