SBI valuation: Setty says market is re-rating in 2026

Why SBI’s valuation debate has resurfaced

State Bank of India (SBI) chairman Challa Sreenivasulu Setty has said the country’s largest lender deserves a better valuation than the market currently assigns it. In an interview with Mint, Setty argued that investors are beginning to recognise improvements in SBI’s financial strength, customer franchise and earnings profile. The discussion has gained traction as SBI’s shares have outperformed several large private-sector peers over the period since he took charge. It also comes at a time when valuations across Indian banking are being reassessed after a phase of underperformance among some private banks.

SBI’s scale is central to the argument. The bank has a loan book of nearly ₹50 trillion, making it by far India’s largest bank. Setty’s position is that scale, technology adoption, improving customer metrics and value embedded in subsidiaries together justify a higher multiple.

Setty’s core claim: performance has been “ownership-neutral”

Setty’s pitch rests on the idea that SBI’s state ownership has not held back execution. He said the bank’s operational performance has remained “ownership-neutral”, particularly in areas such as technology adoption and digitalisation. In his view, the market is gradually recognising this reality.

He also framed his tenure differently from that of some predecessors. Setty said he inherited a bank without a defining problem, unlike earlier leadership periods that were shaped by issues such as stressed assets, consolidation, or market-share pressures. That context matters because it shifts the investor conversation from recovery to valuation and sustainability of performance.

Stock performance since Setty took charge

SBI’s share price performance has been one of the clearest datapoints supporting the re-rating narrative. Since Setty took charge on 28 August 2024, SBI shares rose 28%. Over the same period, ICICI Bank Ltd’s shares were up 10%, while HDFC Bank Ltd’s were down 5%, according to the figures cited.

This relative move has helped SBI narrow the valuation gap with larger private banks. The broader backdrop also includes commentary that private-sector lenders have seen valuation compression, with several trading around or below 10-year averages because of recent underperformance.

Customer franchise: younger customers and satisfaction metrics

Setty said the 71-year-old bank is seeing a greater share of young customers, alongside improving customer satisfaction scores. While the interview did not provide exact customer metrics, the emphasis signals a strategic focus on acquisition and experience, not just balance-sheet growth.

For a large retail and corporate lender, customer franchise trends are often linked to deposit stability, cross-sell potential, and the ability to defend margins over time. Setty’s claim is that these improvements are now more visible to investors.

Digital execution and the role of Yono

Setty highlighted the success of SBI’s Yono digital platform as part of the bank’s transformation narrative. He also pointed to strengthened capital position as another support for valuation.

Alongside this, he outlined a three-pronged artificial intelligence (AI) strategy. The interview excerpt did not list the three components, but the reference signals a continued push to embed AI into operations and customer journeys.

Subsidiaries and investments as a value lever

Beyond core banking, Setty said SBI’s investments and subsidiaries represent another source of value. He cited “significant growth in value from its subsidiaries” as part of the case that the market price does not fully reflect the bank’s overall profile.

For investors, this matters because the market often values conglomerate structures differently from standalone banks. Setty’s argument is that the embedded value is becoming harder to ignore as SBI’s operating metrics and market performance improve.

Valuation markers: P/B multiples across large banks

A separate set of data points in the provided material highlights how SBI’s valuation has moved relative to peers. SBI is currently cited as trading at a price-to-book (P/B) multiple of 2.41, versus HDFC Bank at 2.69, ICICI Bank at 2.92, Axis Bank at 2.20 and Kotak Mahindra Bank at 2.49. A year ago, SBI’s P/B was cited at 1.35, pointing to a sharp re-rating.

The same material notes that HDFC Bank and Axis Bank have been trading at P/B ratios between 1.8 times and 2, below their decade averages, while ICICI Bank is around 2.6 times, on a par with its decade average.

Market cap comparisons and Asia-Pacific context

As of June 19, SBI’s market capitalisation was cited at Rs 9.56 crore, compared with ICICI Bank at Rs 9.67 crore and HDFC Bank at Rs 12.03 crore. The context given was that SBI is narrowing the valuation gap with ICICI Bank and HDFC Bank.

Separately, S&P Global Market Intelligence data for the first quarter of 2026 showed Indian private sector lenders slipping in rankings among the top 20 Asia-Pacific banks by market capitalisation. HDFC Bank fell three positions to seventh place, losing over 26% of its market capitalisation, while ICICI Bank lost about 10% of its market valuation during the quarter.

Key numbers at a glance

Technical levels and the “priced in” question

Trendlyne data cited in the material said SBI was trading above its 50-day and 200-day simple moving averages of Rs 1,023 and Rs 890, respectively. The same bundle of reporting also described SBI as having delivered nearly 70% returns over the last year.

On whether the stock remains undervalued, views cited were mixed. Dr. Ravi Singh, Chief Research Officer at Master Capital Services, said SBI is no longer significantly undervalued and is now trading well above its long-term average valuation, adding that the recent re-rating largely reflects improvement in asset quality and earnings. Bathini of WealthMills reiterated a ‘buy’ view and estimated 10-15% growth in the next 12 months, while Dr. Singh was cited as expecting 15-20% further growth from current levels. Bonanza’s Tiwari was cited as preferring ICICI Bank for long-term investment due to low volatility and accumulation potential, while favouring SBI for near-term gains where valuations are a key factor.

Funding shift: credit growth through bonds and market instruments

Setty also flagged a structural theme for the industry: credit growth could increasingly be funded through bonds and market instruments, not just deposits. While the excerpt does not quantify the shift, the point is relevant to how banks think about funding costs, liquidity management and balance-sheet structure over time.

Market impact: what investors are reacting to

The market reaction implied in the material is a combination of improved operating narrative and better stock performance, alongside a broader reallocation of investor preference across the sector. One section of the provided content described a “structural re-rating” within Indian banking, where no single bank dominates across scale, profitability and valuation. In that framing, ICICI Bank is described as the valuation leader, while PSU banks like SBI continue to trade at lower multiples due to structural discounting, despite improving fundamentals.

At the same time, Axis Securities maintained a constructive outlook on the sector, citing improved asset quality, benign credit costs and attractive valuations, while also noting geopolitical risks linked to the West Asia conflict that could weigh on growth, margins and sentiment in the near term.

Analysis: why SBI’s re-rating matters

SBI’s case is noteworthy because it tests whether a large state-owned lender can sustain a higher valuation as execution improves. Setty’s claims focus on observable drivers investors typically reward: digital adoption (including Yono), customer franchise improvements, stronger capital position, and clearer subsidiary value. The stock’s outperformance since August 2024 strengthens the argument that the market is at least partially reassessing the bank.

But the mixed analyst commentary in the material also shows the next leg of returns is debated. Some see the re-rating as already reflecting improving asset quality and earnings, while others still prefer SBI on valuation versus private peers. The discussion, in other words, has moved from “can SBI improve?” to “how much of that improvement is already in the price?”

Conclusion

Setty’s message is that SBI’s scale, improved execution and embedded subsidiary value warrant a better valuation, and that investors are increasingly acknowledging the bank’s transformation. The next markers to watch, based on what has been discussed, are how SBI sustains customer and digital momentum, and how the market continues to price the sector amid shifting leadership preferences and external risk factors.