State Bank of India (SBI) share price today fell 5.2 per cent to Rs 804 per share on the BSE on Monday. This comes amid a broader sell-off in Indian stock markets and after the lender posted in-line April-June (Q1) quarter results.
SBI reported broadly healthy and in-line profit and return of asset (RoA) on the back of a strong 16 per cent YoY credit growth and lower opex with the adhoc wage revision provisions largely behind the bank, said Emkay Global.
“Deposit growth was slower in 1Q, but the bank claims to have enough BS liquidity and would look at tinkering SA rates, if the need arises. CET 1 ratio jumped by 50bps QoQ to 10.8 per cent, benefiting from higher AFS reserves as per new the investment classification norms. That said, we believe the bank should raise capital sooner, factoring in the potential impact of the soon-to-be-released final ECL norms and growth trajectory,” Emkay while suggesting a ‘Buy’ and a target price of Rs 1,025.
On Monday, SBI fell 5.52 per cent to hit a low of Rs 801.05 on BSE. Nomura India said SBI remains its top pick. It noted that SBI’s domestic loan-to-deposit ratio (LDR) at 69 per cent is still well below the 79 per cent for the banking sector, and LCR at 127 per cent makes its liquidity position very comfortable.
“CET1 increased 40bp QoQ to 10.8 per cent (against the regulatory minimum of 8.8 per cent). The management notes that SBI is well positioned for a potential transition to ECL provisioning norms with potential impact of provisioning on the back book likely to be lower than previously called out (0.8-1 per cent of loans). Our FY25-26F EPS is largely unchanged. Reaffirm Buy, with target price up to Rs 1,030 (previously: Rs 1,000),” it said.
Prabhudas Lilladher said SBI’s Q1 slippages were higher led by agri (seasonal) and unsecured loans but the bank has recovered a chunk of unsecured loans.
“We maintain multiple at 1.5 times on core FY26 ABV but raise SOTP-based target price to Rs 960 from Rs 910 led by (1) Rs 3,700 crore accretion to equity due to new investment norms, upgrade in core earnings by 2 per cent and increase in subsidiary valuation. Retain ‘BUY,” PL said.
YES Securities said the bank does not see any structural uptrend in slippages and, hence, maintained its credit cost guidance. Net interest margin was lower sequentially, as the bank had no interest on income tax refund in Q1 but the management expects to maintain it at current levels.
“Deposits growth continues to lag advances growth but loan to deposit ratio remains comfortable. We maintain ‘Buy’ rating on SBI with a revised price target of Rs 1,035,” YES Securities said.
ICICI Securities also upped its SBI target to Rs 1,000 from Rs 980, valuing core banking business at unchanged multiple of 1.6 times FY26 ABV.
“Our target multiple is higher than projected RoA as we accord premium due to strong execution, healthy deposits franchise, superior PPoP growth, continued comfort on asset quality and high visibility of over 16 per cent RoE. On a relative basis, we see SBI dealing with lesser challenges on growth due to comfortable LDR and liquidity. We are also not worried about the impending change of guard at SBI,” it said.
Comments
0 comment