SBI overtakes Infosys, claims fifth spot in market cap race

22 Feb 2024 , 10:49 AM

The largest lender in the nation by assets, State Bank of India (SBI), has ascended the market capitalization ladder once more, this time surpassing Infosys, a major software company. SBI’s stock has increased by as much as 20.5% so far in February, marking its biggest monthly gain in three years. 

When it increased by 38.3% in February 2021, similar improvements were last observed. Additionally, the state-owned lender overtook LIC in market valuation last week to retake its position as the most valuable PSU. A 10% decline in the price of LIC’s shares allows SBI to reclaim the title of most valuable PSU.

SBI is now ranked fifth in the market valuation rankings, after Reliance Industries, Tata Consultancy Services (TCS), HDFC Bank, and ICICI Bank. Its valuation is ₹6.89 Lakh Crore. It’s interesting to note that three of the top five companies are from the banking industry, dominating the list. The increased participation rate from the banking industry is a sign of the growing influence that financial firms have over investors. Infosys’ market capitalization was ₹6.87 Lakh Crore as of Wednesday’s close.

TCS is valued at ₹14.4 Lakh Crore, whereas RIL is ranked first on the valuation chart with a market capitalization of over ₹20 Lakh Crore. HDFC Bank (₹10.9 Lakh Crore) and ICICI Bank (₹7.4 Lakh Crore) came next.

SBI reported lower-than-expected results for the quarter ended December 31, 2023, mostly due to one-time charges associated with pay settlement. The one-time pension and dearness allowance costs were estimated to be ₹7,100 Crore, and the extraordinary items were mostly anticipated. Nonetheless, the bank demonstrated some improvement in asset quality in Q3 and effectively managed its net interest margins (NIMs). In Q3FY24, the biggest lender posted a net profit of ₹9,164 Crore, a 35% YoY decrease.

Even though the number of newly formed nonperforming loans (NPLs) has increased by 57% year over year (YoY), according to Jefferies, which has a buy recommendation on SBI and a 12-month target price of ₹810, the rate of accretion is still relatively low. Across all categories, the Gross NPL ratio is low at 2.4%, while the coverage ratio is strong at 74%.

The shares of SBI have yielded a 35% gain in the past six months. In comparison, the benchmark Nifty50 returned 14% over the same period, while the shares of Infosys have increased by 18%.

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