A Visual Look at India's Largest Bank!

What comes to your mind when I say SBI?

State Bank of India is the 43rd largest bank in the world and ranked 221st in the Fortune Global 500 list of the world's biggest corporations of 2020, being the only Indian bank on the list.?It is a public sector bank and the largest bank in India with a 23% market share by assets and a 25% share of the total loan and deposits market*.

While SBI is India's largest multinational bank, its market capitalization (Share Price X Number of Shares Outstanding) as on July 20th 2022 is only 4.54 Lakh Crores compared to its smaller private competitor albeit India's Largest Private Bank HDFC Bank (Market Capitalization Rs. 617,499 crores - Rs. 6.18 Lakh Crores). This is a significant difference despite SBI's share price moving up from Rs. 150 per share in May 2020 to Rs. 507 per share on July 2022. So let us analyze this bank visually for educational purposes, so you can do your own research and decide for yourself if this is a good investment or not based on your own judgement.

Let's first take a look at SBI's snowflake on Simply Wall Street. It's a nice big green snowflake, which is always good to see:

SBI's share price has really moved (By more than 3X) in the last two years, but as stated above, it is still nowhere near the market capitalization and PE of its private peers as you will see in the screenshots below:

The PE of Kotak Mahindra is a whopping 30.1 , ICICI Bank is 21.6, HDFC Bank 18.9 while SBI is just 12.6

Now take a look at how SBI's PE vs a Fair Value and we see it is undervalued:

However, if we see the Share Price in Absolute terms vs Fair Value, the Discounted Cashflow Model shows that the share is overvalued. But we should never take any model in isolation when we study companies and their future potential:

The above valuation snowflake shows 4 out of six parameters are positive

Now let's take a quick look at SBI's future ROE, and future growth prospects:

Clearly SBI is more of a value pick than a growth one is what it looks like. But, one can never say considering SBI has given a whopping 3.33X return in the last two years!

Now let's look at the earnings and revenues which are pretty humungous considering we are talking about India's LARGEST bank here- Revenues are at Rs. 3.46 Trillion (Or Rs. 3.46 lakh crores) and earnings are Rs. 657 Billion or Rs. 65700 crores!:

SBI's earnings have also grown by 57.9% in the past year and 55% CAGR in the past 5 years! This is crazy impressive! But this is unprecedented as analysts only forecast the company to grow at 18.5% in the coming years. This is not low by any means but not super high growth like in the past 5 years.

The above shows SBI's financial health. Not very different from what you would see in a large bank. What is worrying is that SBI's allowance for bad loans is low at 22% and hence that is seen in the financial health snowflake below:

The icing on the cake is that SBI's dividend yield at the current share price is 1.43%

Now let's look at SBI's balance sheet and wrap up this visual analysis of India's largest bank!

So there you go.....that was the visual analysis of State Bank of India (A public sector bank), India's largest Bank. Did you like this information? Will you buy SBI shares? Let me know in the comments. Follow me on?LinkedIn?(https://www.dhirubhai.net/in/rajaramjayaram/) for more such visual insights on companies.

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DISCLAIMER:

Please note that this post is purely intended for educational purposes on intuitive investing only and not a stock recommendation. Please do your own research before making any investments in the stock market or other asset classes. Investing carries a risk of losing your capital. I am the author of a book 'Just Invest and Become Insanely Wealthy' , on this new way of investing that would help the beginner, intermediate and experienced investor become better investors across various asset classes. I have a small equity stake in Simply Wall Street. I have an investment and equity interest in Simply Wall Street.

*Source: Wikipedia