As of March 2021, State Bank of India (SBI) had a market capitalization of over INR 3 lakh crore, making it the largest public sector bank in India. With a long history spanning more than 200 years, the bank has made a substantial contribution to India’s economic expansion. We’ll go over five factors that make buying SBI stock a smart move for investors and SBI share price worth investing.
- Good Financial Performance: Over the years, SBI has continuously produced strong financial results. In the fiscal year 2020–21, the bank reported a net profit of INR 20,410 crore, up 41% over the prior fiscal year. With its gross non-performing assets (NPAs) ratio falling from 7.53% in March 2020 to 4.98% in March 2021, the bank’s asset quality has also improved. Because of its sound business strategy and effective management techniques, SBI has demonstrated great financial performance, making it a desirable investment for long-term investors.
- Business Model Diversification: Retail banking, corporate banking, treasury operations, and overseas activities are all parts of SBI’s business strategy. As of March 2021, the bank held a market share of over 18% in home loans and 21% in auto loans, indicating a sizable presence in the retail banking sector. With a market share of approximately 15% in credit to multinational corporations, SBI also has a significant corporate banking franchise. The bank is a genuinely global institution because to its 32-country overseas activities. SBI’s varied business model gives it a significant competitive advantage in the market and enables it to reduce the risks related to particular business segments.
- Government Support: The Government of India owns a controlling stake in SBI, a public sector bank. The government has demonstrated its dedication to helping the bank by giving it financial infusions as needed. The government invested INR 14,500 crore in SBI during the fiscal year 2020–21, assisting the bank in raising its capital adequacy ratio and advancing its growth objectives. SBI shares are a relatively low-risk investment option thanks to the government’s backing, which offers investors a certain measure of security.
- Good Brand Reputation: SBI is one of the most recognisable and trusted brands in the banking sector and enjoys a high brand reputation in India. The bank’s lengthy history and major economic impact in India have contributed to the development of its reputation as a symbol of dependability and trust. SBI has a competitive advantage in the sector thanks to its solid brand reputation, which also enables it to draw in a sizable customer base.
- Strategic Alliances: Value investors have a great opportunity right now thanks to the reasonable valuation that SBI’s shares are now trading at. SBI’s price-to-book ratio (P/B) as of March 2021 was 0.74, which is less than the 1.2 average for the sector. The COVID-19 pandemic’s effects on the banking sector, which have hampered the bank’s near-term growth prospects, are to blame for SBI’s poor valuation.
Conclusion
SBI is a reputable bank with a long history, a diversified business plan, solid financial results, and a solid brand recognition. For long-term investors, BOB share price also presents a fantastic investment opportunity due to the support of the government and its competitive price. But, before making any investment, it is crucial to do your own research and speak with a financial expert.
