SBI Returns as Citi’s Top PSU Pick with Strong Growth Outlook

Citi Reinstates ‘Buy’ Rating on SBI

Citi has brought back State Bank of India (SBI) as its top PSU pick with a “Buy” rating. The brokerage set a target price of ₹1,050 per share, pointing to SBI’s strong growth potential and solid fundamentals.

Citi expects SBI to deliver a return on assets (ROA) of around 1% and a return on equity (ROE) of 14-15% during financial years 2026 and 2027. The report shows confidence in the lender’s ability to grow steadily while keeping profitability strong.

Loan Growth and Margins

SBI’s loan book looks set to expand by 13-14% year-on-year in FY26 and FY27, Citi said. Net interest margins (NIMs) on interest-earning assets should stay in the 2.8-2.9% range.

At the same time, Citi expects credit costs to hold at 40-45 basis points. With stable margins and low credit costs, SBI has the base it needs to strengthen its returns over the next two years.

SBI Remains the Preferred PSU Pick

Citi called SBI the most attractive option among state-run lenders, underlining its large scale, strong balance sheet, and wide reach. The bank continues to hold its position as the SBI top PSU pick for investors who want stable and rewarding exposure in India’s financial sector.

Analysts believe SBI’s large customer base and proven track record give it an edge over other PSU banks. Because of this, it remains the preferred choice for both domestic and global investors.

MSCI Inflow Opportunity

Beyond core banking growth, SBI could also attract big inflows from MSCI index changes. Regulators may soon raise the FII (foreign institutional investor) limit in PSU banks from 20% to 26%.

If this change takes place, SBI alone could draw $466 million in inflows, according to Nuvama Alternative’s estimates. Such a boost would increase SBI’s liquidity and help the stock attract stronger global demand.

Q1FY25 Results Snapshot

SBI reported its June quarter (Q1FY25) earnings on August 8. The lender posted a net profit of ₹19,160 crore, supported by higher other income. Profit rose on a yearly basis, even though core income fell short of expectations.

Here are the key numbers:

• Net Interest Income (NII) came in flat at ₹41,072.4 crore.

• Gross non-performing assets (NPA) held steady at 1.83%, compared to 1.82% in Q4FY24.

• Net NPA stayed unchanged at 0.47%, showing consistent asset quality.

• Fresh slippages rose to ₹7,945 crore, higher than ₹4,222 crore in the previous quarter.

While slippages increased, analysts noted that strong profitability and stable NPAs reflect SBI’s financial strength.

Market Performance

SBI’s stock closed Wednesday at ₹866.15, down 0.51% for the day. Still, the stock trades near its 52-week high, supported by an 8% gain in the past month. The steady rally shows investors continue to trust SBI’s growth story.

Conclusion

Citi’s latest call confirms SBI’s leadership role among PSU banks. With strong loan growth, stable margins, steady asset quality, and the chance of MSCI inflows, SBI holds a clear edge over peers.

As India’s largest lender, SBI looks ready to deliver sustained returns. Investors who want a mix of stability and growth in the banking sector can rely on the SBI top PSU pick.

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