Investment Thesis — the long form

The full house case per bank: what the franchise earns, where earnings go, what the price already assumes, and what would change the answer.

Source: Buoyant Capital, “India's Big Four Private Banks: Franchise, Returns and the Price of Perfection” — coverage initiation, 7 September 2026, 55 pages, internal. Valuation date 7-Sep-2026, NSE closes, standalone financials. Everything on this page is transcribed from that note, not re-derived. State Bank of India is not covered by it — that note is the four private banks only — so SBI is shown from the peer table and the sell-side, and labelled as such.

Rating

—

BUY

CMP

711

Target price

918

Upside

29.0%

FY28E EPS

—

₹ per share

FY31E PAT

156071

₹ crore

The thesis

Why this stock works, or does not.

the largest, cheapest-to-run bank in India is priced at 1.6x core book — a decade low, below Axis — because of a leadership question, not a franchise problem. Normalised-capital ROE is already ~16%; reported ROE will follow as ₹73/sh of surplus capital is levered and 100 bp-expensive e-HDFC liabilities roll oﬀ.

Earnings trajectory

Where the profit comes from, year by year.

FY26–31E PAT CAGR 16%; FY27E is the last year of single-digit growth (+9%) as NIM troughs; FY28–31E EPS compounds 17–18% on NIM +30 bp, cost/income to 34% and 15% loan growth. Our FY28E EPS (62.4) is 4–5% below the street. Sustainable ROE 16% (ROA 1.9–2.0% × 8.3x normalised leverage) vs COE 12.75% — the 50 bp governance premium is the only reason the COE is not 12.25%.

Sustainable ROE versus cost of equity

The number the whole valuation rests on.

Valuation

How the target is built, and the bull/bear span.

capital-adjusted RIM fair P/B 1.87x on Mar-26 book; TP ₹918 (core ₹794 + subsidiaries ₹124), +29%. Bear ₹602 (−15%), bull ₹1,163 (+64%). Market-implied ROE 15.5% with 9% growth. Catalyst / risk: the MD/CEO decision (term ends 26-Oct-2026). Continuity or a credible internal successor removes the overhang; an external hire with senior attrition is the bear case. Second risk: NIM stuck at 3.3% if FCNR(B) money is deployed into thin corporate spreads.

Catalyst and risk

What moves it, and what breaks it.

the MD/CEO decision (term ends 26-Oct-2026). Continuity or a credible internal successor removes the overhang; an external hire with senior attrition is the bear case. Second risk: NIM stuck at 3.3% if FCNR(B) money is deployed into thin corporate spreads.

Driver model — FY22 actual through FY31E

The house forecast. Blue-shaded years are estimates in the source workbook.

₹ crore unless stated	FY22	FY23	FY24	FY25	FY26	FY27E	FY28E	FY29E	FY30E	FY31E
Net advances	13,68,821	16,00,586	24,84,862	26,19,609	29,37,166	33,48,369	38,50,625	44,28,218	50,48,169	57,29,672
Loan growth %	20.80	16.90	55.20	5.40	12.10	14.00	15.00	15.00	14.00	13.50
Deposits	15,59,217	18,83,395	23,79,786	27,14,715	31,05,250	35,71,037	41,42,403	48,05,188	55,25,966	62,99,602
Deposit growth %	16.80	20.80	26.40	14.10	14.40	15.00	16.00	16.00	15.00	14.00
NII	72,009	86,843	1,08,533	1,22,670	1,28,686	1,39,024	1,62,516	1,90,368	2,20,304	2,53,289
NIM %*	4.00	4.10	3.60	3.65	3.45	3.30	3.42	3.52	3.58	3.62
Other income	29,510	31,215	49,241	45,632	62,533	60,184	67,362	76,071	86,558	98,419
Opex	37,442	47,652	63,386	68,200	72,660	78,473	86,320	95,815	1,06,355	1,18,054
PPOP	64,077	70,406	94,388	1,00,102	1,18,559	1,20,735	1,43,558	1,70,624	2,00,507	2,33,654
Provisions	15,062	11,920	23,492	11,600	23,390	14,142	17,997	22,767	26,060	29,639
PAT	36,961	44,109	60,812	67,347	74,671	81,544	96,054	1,13,111	1,33,452	1,56,071
Cost/income %	36.90	40.40	40.20	40.50	38.00	39.40	37.60	36.00	34.70	33.60
Credit cost %	1.20	0.80	1.15	0.45	0.84	0.45	0.50	0.55	0.55	0.55
GNPA %	1.17	1.12	1.24	1.33	1.15	—	—	—	—	—
ROA %	1.94	1.95	2.00	1.79	1.80	1.76	1.84	1.90	1.97	2.03
ROE %	16.70	17.00	16.90	14.30	14.00	13.70	14.50	15.20	15.90	16.40
CET1 %	17.00	16.40	16.30	17.20	17.50	17.30	17.00	16.60	16.50	16.40

PAT and PPOP

₹ crore

ROA and ROE

NIM and credit cost

Where the sell-side sits

Verified broker targets held in the library.

Broker	Rating	TP	Basis
Ambit	BUY	1050	~2.1x FY28E standalone BVPS

The challenge to this thesis

Narain's critique, applied to every name in the group.

▸ FCNR(B) changes the sector's RISK, not its return
The briefing treats the FCNR window as the funding bottleneck breaking — an unambiguous positive.
▸ 19% loan growth is not being rewarded, and the market is right
The briefing reads 19% system credit growth as a structural volume story at 1–1.5x nominal GDP.
▸ Mean reversion is the weakest part of the bull case
The briefing anchors fair values on banks sitting in the lower half of their own historical P/B band.

Read the chapter thesis with this beside it. The note's fair values sit 12–40% above spot and rest partly on multiples returning toward their own history; Narain's view is that those means have permanently reset. Full critique →