Why SBI Share Price is Rising

The Indian banking sector has shown significant growth over the years, driven by a push toward digitalisation and financial inclusion across urban and rural areas. With more people accessing banking services, banks have been able to increase their deposit base and lending activities.

However, the sector still faces hurdles, including the need to manage rising non-performing assets and global interest rate fluctuations, which impact profitability and growth prospects.

State Bank of India (SBI) is the country's largest public sector bank, with a presence across India and various international markets. It offers a comprehensive suite of services ranging from retail banking and corporate banking to investment banking and wealth management.

SBI's strategic role in India's economy and its influence in the banking sector often make it a focal point for investors looking for stability and growth.

In the past five days, SBI share price surged 5%. This movement is noteworthy, given that SBI has faced significant market volatility.

Let's take a closer look at factors driving this upward momentum in SBI share price.

#1 Fund Raising

On 23 October 2024 SBI, has raised Rs 50 billion (bn) by issuing its first Additional Tier 1 bonds of the financial year, compliant with Basel III norms.

The bonds, carrying a 7.98% annual interest rate, are perpetual with an option for SBI to redeem them after 10 years and on each anniversary date following that period. These bonds are rated AA+ with a stable outlook by both CRISIL Ratings Limited and CARE Ratings Limited.

Investor demand for the bond issuance exceeded expectations, reaching over 3.5 times the initial issue size of Rs 20 bn, with a total of 108 bids received.

The high level of interest came from various institutional investors, including provident and pension funds, insurance companies, mutual funds, NBFCs, and banks. Chairman C.S. Setty noted that this broad participation reflects the confidence investors hold in SBI, given its size and reputation.

SBI decided to increase the issue due to the strong demand. This issuance is notable as it enables SBI to diversify its capital sources while enhancing long-term, non-equity regulatory capital.

The rise in SBI's share price following this fundraising effort can be attributed to increased investor confidence. Successfully raising capital on favourable terms, signals market trust in SBI's stability and growth potential.

#2 New Credit Line

On 24 October 2024, SBI successfully signed a € 150 million (m) line of credit agreement with KfW, the German Development Bank, at its IFSC Gift City branch in Ahmedabad.

This significant credit line is designated for financing renewable and climate-friendly energy projects across India, demonstrating SBI's commitment to supporting the nation's green energy initiatives and sustainability goals.

This funding will allow SBI to accelerate investments in sustainable projects, including solar, wind, and other forms of renewable energy.

By diversifying its funding sources through green initiatives, SBI is setting a benchmark in sustainable financing and enhancing its appeal to eco-conscious investors.

Investors see this commitment as a step towards steady growth in a high-priority sector, increasing their confidence in SBI's future direction.

This focus on green financing is viewed as both a progressive step for the bank and a contributor to its long-term profitability, which has fuelled recent gains in its share price.

What Next?

C S Setty, SBI chairman highlighted in a recent interview that SBI has a strong credit pipeline valued at Rs 4 trillion (tn), primarily driven by the private sector, which is expected to increase capital spending during the financial year's second half.

The bank is seeing substantial interest in financing infrastructure, notably in sectors like roads, renewable energy, and refineries.

This increase in capital expenditure reflects a broader trend, as public sector spending is also expected to rise, supported by the government's record Rs 11.1 tn allocation for capital expenditure, set at 3.4% of the GDP.

This dual push from both public and private sectors positions SBI to leverage India's expanding infrastructure needs.

In addition to funding new projects, SBI is also witnessing corporations drawing loans for brownfield expansions, a shift indicating a resurgence in corporate borrowing and expansion initiatives.

This growing demand suggests SBI will play a pivotal role in funding India's development, keeping the bank aligned with the nation's economic priorities.

Looking ahead, SBI's plans for its subsidiaries remain focused on organic growth. While it has no immediate plans to divest stakes, SBI stands ready to inject capital if any subsidiary requires funds for expansion.

How SBI Share Price has Performed Recently

In the past five days, SBI share price is up by 5.5%. In the last month, it is up 5%.

In 2024, so far its share price has surged 29.5% and it has rallied 46.7% in the last one year.

The stock touched its 52-week high of Rs 912.1 on 3 June 2024 and a 52-week low of Rs 555.3 on 22 November 2023.

About SBI

State Bank of India (SBI) is an Indian multinational public sector banking and financial services institution.

It provides a wide range of products and services to individuals commercial enterprises large corporate public bodies and institutional customers.

The bank operates in four business segments namely treasury banking, corporate/ wholesale banking, retail banking and other banking business.

SBI provides a range of banking products through their vast network of branches in India and overseas including products aimed at NRIs.

For more details about the company, you can have a look at SBI factsheet and latest quarterly results on our website.

You can also compare SBI with its peers:

SBI vs Canara Bank

SBI vs Bank of Baroda

SBI vs HDFC Bank

And to know what's moving the Indian stock markets today, check out the most recent share market updates here.

Happy Investing.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...