SBI beats Infosys to become the fifth largest firm by market capitalisation

The State Bank of India (SBI), the country’s largest lender by assets, has yet again climbed the market cap ladder, this time by overtaking software giant Infosys. The stock of SBI has rallied as much as 20.5% in February so far, clocking its best-ever monthly return in three years. The last time such gains were seen was in February 2021, when it surged 38.3%. The state-owned lender had also reclaimed the status of the most-valued PSU last week by overtaking LIC in market valuation. SBI reclaims the most valuable PSU tag following a 10% drop in LIC share price.

With a market valuation of ₹6.89 lakh crore, SBI occupies the fifth spot after Reliance Industries, Tata Consultancy Services (TCS), HDFC Bank and ICICI Bank. Interestingly, banking names dominate the list, with three of the top five firms from the sector. The higher number of participations from the banking sector indicates financial firms’ rising clout in the eyes of investors. As of Wednesday’s close, Infosys had a market capitalisation of ₹6.87 lakh crore.

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While RIL tops the valuation chart with a market capitalisation of about ₹20 lakh crore, TCS commands a valuation of ₹14.4 lakh crore. That was followed by HDFC Bank (₹10.9 lakh crore) and ICICI Bank (₹7.4 lakh crore).

For the quarter ended December 31, 2023, SBI reported lower-than-expected earnings, dragged by one-time costs towards wage settlement. The exceptional items were largely expected and one-time pension and dearness allowance costs were pegged at ₹7,100 crore. However, the bank managed its net interest margin (NIMs) well in Q3 and showed some improvement in asset quality. The largest lender reported a net profit of ₹9,164 crore in Q3FY24, down 35% YoY.

Jefferies, which has a buy rating on SBI with a 12-month target price of ₹810, believes that even as fresh nonperforming loan (NPL) formation has risen by 57% year-on-year (YoY), the level of accretion is still quite low. The Gross NPL ratio of 2.4% is low (across segments) and the coverage ratio is high at 74%.

“Overall provisions were deflated by write-back of investment provisions, but core credit costs are also lower than our estimates and could offer upside to FY25/26 estimates,” wrote the foreign brokerage in an investor note.

Over the last six months, shares of SBI have generated a return of 35%. In contrast, the stock of Infosys has gained 18%, and the benchmark Nifty50 yielded a return of 14% during the same period.