SBI shares up 25% in 2025: Analysts see strong credit cycle ahead; will the stock continue to rally next year?

Core Insights - State Bank of India (SBI) is on track for one of its strongest years, with shares rising nearly 25% in 2025, positioning it for a fifth consecutive year of positive returns and its most impressive run in two years [2][4] - The growth is driven by a favorable earnings outlook, improving asset quality, and expectations of steady credit growth, supported by a stable macroeconomic environment [2][4] - Analysts expect SBI to grow faster than the broader industry due to its strong balance sheet and low-cost deposit base, with a loan book accounting for nearly 23-24% of India's total [3][4] Financial Performance - In the September quarter, net interest margins expanded by 7 basis points due to better deposit repricing and liability management [3][4] - The Current Account and Savings Account (CASA) ratio stands at 36.9%, with SBI commanding over 22% market share in total deposits and around 23% in CASA deposits [3][4] - SBI's credit cost is maintained at just 50 basis points while growing at 12-14% [3] Earnings Estimates and Valuation - Parag Thakkar of Fort Capital estimates SBI's FY27 earnings per share at Rs 85 and book value at Rs 585, indicating the stock trades at about 1.1 times book value for a return on assets trending toward 1.3% [3][4] - CLSA raised its target price to Rs 1,170, implying nearly 20% upside, while Axis Securities maintains a Buy rating, citing no visible headwinds on growth or asset quality [3][4] - HSBC has upgraded its valuation outlook with a revised target price of Rs 1,110, and Nomura expects SBI to deliver return on assets and return on equity of 1.1% and 16%, respectively, through FY27-28 [3][4] Growth Outlook - Analysts believe SBI is entering the next phase of its growth cycle with multiple tailwinds improving margins, robust loan growth, and healthy asset quality [3][4] - Despite potential near-term consolidation, market experts view any correction as an attractive buying opportunity, maintaining a positive sentiment toward SBI going into 2026 [3][4]