“SBI has built a strong retail franchise and also sustained its deposit market share. Even on digitisation, the progress has surprised, unlike peer SoE (State Owned Enterprises) banks,” said Morgan Stanley in a note to clients. “As the corporate cycle turns, we expect earnings estimate upgrades and significant re-rating.”
The brokerage said SBI reminds it of China Merchants Bank (CMB), which has shown consistent improvement in its retail franchise compared to the country’s other public sector banks.
“Though there are significant differences between CMB and SBI, we believe SBI could show a similar re-rating trend vs. Indian SoE banks,” said Morgan Stanley.
SBI shares have gained almost 120 per cent since November 1 as against 47 per cent gains in the Bank Nifty index in the period. The stock has been an underperformer in recent years with private retail lenders hogging the limelight.
Analysts said the recovery in the growth cycle augurs well for industrial banks like SBI.
“The current cycle reminds us of the early 2000s, a period in which SoE banks outperformed significantly in the initial years — SBI looks best placed to play this theme,” said Morgan Stanley. “SBI profitability does very well as the economic cycle turns — this coupled with strong improvement in the retail franchise should drive significant upside in this cycle.”