Home Loan Expansion And Digital Banking Will Drive India's Future

Key Takeaways

• Accelerated retail lending and digital transformation are driving operational efficiency, broader market reach, and positioning for sustained revenue and margin growth.
  
• Enhanced asset quality, robust funding base, and capital strength support long-term profitability and resilience amid expanding opportunities in India's formalizing economy.
  
• Rising competition, funding pressures, slow digital progress, and asset quality risks threaten profitability, margins, and growth sustainability amid ongoing macroeconomic uncertainties.

Catalysts

Provides banking products and services in India and internationally.

• SBI's strong performance in retail lending, particularly robust home loan growth (15% y/y) and expectations for recovery in Express Credit and auto loans, positions it to capitalize on India's rising middle class and increasing demand for mortgages and consumer credit, supporting future revenue growth.
  
• Ongoing digital transformation initiatives, including wider adoption of the YONO platform (already at 90 million users) and process reengineering through Project SARAL, are simplifying operations, enhancing productivity, and expanding inclusive access to banking services across urban and rural areas-laying the foundation for improved cost to income ratios and margin expansion.
  
• The bank's ability to maintain its dominant low-cost deposit base (22.17% deposit share, rising current account balances) and extensive omnichannel reach provides structural funding advantages over peers; this is expected to support net interest margin stability as deposit repricing benefits flow through over the next several quarters.
  
• Improved underwriting in SME and retail segments (integration of AI-driven business rule engines and predictive models) is reducing probability of future asset quality shocks, while a clear downward trajectory in net NPA and slippage ratios should further decrease credit costs-contributing to higher long-term earnings and ROE.
  
• A robust capital position (post-QIP, CET1 buffer up by 233bps) combined with a strong pipeline of government and infrastructure lending opportunities (including green energy and data center–related projects) positions SBI to benefit from the ongoing formalization of the Indian economy and anticipated future credit expansion, strengthening long-term revenue and profit growth.

State Bank of India Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming State Bank of India's revenue will decrease by 3.9% annually over the next 3 years.
• Analysts assume that profit margins will increase from 22.7% today to 29.4% in 3 years time.
• Analysts expect earnings to reach ₹914.0 billion (and earnings per share of ₹102.2) by about August 2028, up from ₹794.4 billion today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as ₹621.9 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 15.9x on those 2028 earnings, up from 9.5x today. This future PE is greater than the current PE for the GB Banks industry at 11.9x.
• Analysts expect the number of shares outstanding to grow by 3.43% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 14.88%, as per the Simply Wall St company report.

State Bank of India Future Earnings Per Share Growth

Risks

• Increasing competition from NBFCs, fintechs, and large private banks in both retail and corporate lending is eroding SBI's traditionally dominant market share, especially in lending to high-yielding segments and new digital-first customer bases-this is likely to suppress revenue growth and put pressure on long-term profitability.
  
• Persistent and potentially structural decline in CASA (Current and Savings Account) ratios, with a rising share of costlier fixed deposits, is driving up SBI's cost of funds. If this trend continues, net interest margins (NIMs) will remain compressed and could weaken earnings power.
  
• Accelerating digital transformation among peers and fintech disruptors, coupled with inconsistent progress on SBI's own digital initiatives (such as delays in fully rolling out digital documentation for products like Express Credit), may lead to loss of future-ready customers and slow growth in low-cost, high-margin activities.
  
• Potentially higher credit risk emerging from the MSME, agri, and unsecured retail portfolios, as reflected in elevated slippages this quarter and systemic concerns about sectoral stress, could result in increased provisioning and place long-term pressure on asset quality, ROE, and ROA.
  
• Ongoing macroeconomic uncertainties-such as global trade and tariff volatility, domestic sectoral disruptions (evident from supply chain issues and decelerating industrial activity), and uneven demand in key lending segments-pose risks to consistent credit growth and could affect both topline growth and earnings resilience over the long term.

Valuation

• The analysts have a consensus price target of ₹938.151 for State Bank of India based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of ₹1102.0, and the most bearish reporting a price target of just ₹720.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be ₹3104.9 billion, earnings will come to ₹914.0 billion, and it would be trading on a PE ratio of 15.9x, assuming you use a discount rate of 14.9%.
  
• Given the current share price of ₹821.85, the analyst price target of ₹938.15 is 12.4% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.