SBI is undervalued despite strong financials, says analyst

Chakri Lokapriya, Chief Investment Officer of Equities at LGT Wealth, recently shared his views on the banking sector during a segment on Business Today TV. He focused on the rise of private sector banks and the financial sector as a whole. Lokapriya believes that non-banking financial companies (NBFCs) will benefit from expected interest rate cuts. He predicts at least a 75 basis point reduction in rates soon. He noted that while initial impacts on loan books might occur, he expects substantial growth in loans, especially for industrials-linked NBFCs like REC. He also expressed confidence in public sector banks (PSBs), particularly the State Bank of India (SBI). Lokapriya highlighted that SBI is currently trading below its projected price-to-book value, despite having a strong balance sheet. Additionally, he mentioned mid-cap PSBs like Canara Bank and Union Bank of India, praising their clean balance sheets and favorable valuations. Although he acknowledged the robust performance of private banks like HDFC and ICICI, Lokapriya stressed the potential of NBFCs and PSBs in the current market. He also referred to the upcoming Reserve Bank of India (RBI) credit policy and the new governor's efforts to enhance market liquidity.