How good will 2025 be for SBI shareholders?

State Bank of India (SBI) has had a strong year. As of December 11, 2024, its shares are trading at ₹866, up 41.5% from ₹612.25 a year ago. Shareholders of SBI have made more compared to benchmark indices like Nifty Bank (up 13% in the same period) and Nifty 50 (up 17-18%).

Is 2025 likely to be just as good or better? To put things into perspective, out of the 50 analysts covering SBI, 27 have a target price of ₹1,000 or more on the stock.

The Bullish view

Jefferies has kept its “Buy” rating on SBI, with a target price of ₹1,030, implying a potential 18% upside.

Jefferies likes SBI because of its strong asset quality

and solid earnings outlook. The bank is also well-placed to handle interest rate cuts due to its loans linked to the Marginal Cost of Funds-Based Lending Rate (MCLR).

Jefferies believes SBI will see strong recoveries and earnings growth in the second half of FY25.

Cautious view

Bernstein’s Pranav Gundlapalle who believes that SBI shares are 'fairly valued' expects limited headroom for further rise. One of the factors that bothers Gundlapalle is the fact that SBI's deposit growth has been slower than that of other private banks.

A strong deposit growth is important for banks to lend more. The recent cash reserve ratio (CRR) cut by the RBI may provide short-term relief, but Gundlapalle believes it won’t change the bank’s long-term growth potential unless it improves deposit growth.

After its latest earnings, SBI cuts its guidance for deposit growth from 12-13% to 10 -11%. However, with over ₹50 lakh crore in deposits at the end of September 2024, the bank had a healthy credit-to-deposit ratio of 67%.