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Brokerages Expect Major Upside in State Bank of India Shares as Asset Quality Improves

Jefferies also maintained its buy rating on SBI but raised its target price to Rs 375 from Rs 365 earlier. It was an operationally weak quarter for SBI but FY20 should be better, said the note by Jefferies.

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Updated:May 13, 2019, 5:31 PM IST
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Brokerages Expect Major Upside in State Bank of India Shares as Asset Quality Improves
File photo of an SBI branch in Delhi (Reuters)

Brokerage firms and analysts cheered State Bank of India’s (SBI’s) March quarter earnings by raising target price on the stock while maintaining their ‘buy’ rating. State Bank of India (SBI), in a post-market hours announcement on Friday, said net profit for the March quarter stood at Rs 838.4 crore compared to a loss of Rs 7,718 crore in the year-ago quarter. The bank reported a net decline of Rs 15,015 crore in gross non-performing assets (NPAs) against a net increase of Rs 24,286 crore in the year-ago period. SBI’s provision coverage ratio was at 78.73% for the March quarter versus 74.6% a year ago.

Nomura maintained its buy rating on SBI and raised its target price to Rs 400 from Rs 375 earlier. The global investment bank expects the credit costs to moderate to less than 100 basis points over FY19-21. Nomura said it sees clear visibility of 14% RoE (return on equity) by the bank.

CLSA also raised its target price on the SBI stock to Rs 390 from Rs 380 earlier. “SBI is our top pick from the PSU banks space. The fall in credit costs will drive earnings rebound. Expect credit costs to halve from 2.6% in FY19 to 1.2% in FY20. The bank is also gaining share in loans aided by low funding costs", said CLSA.

Jefferies also maintained its buy rating on SBI but raised its target price to Rs 375 from Rs 365 earlier. It was an operationally weak quarter for SBI but FY20 should be better, said the note by Jefferies. The valuations were below the historical average, and Jefferies increased its FY20 EPS (earnings per share) estimate by 30.7%.

Among other brokerage firms, Prabhudas Lilladher raised target price on SBI stock to Rs 427, Morgan Stanley also had a buy rating with a target price of Rs 425, while Kotak Institutional Equities gave a target of Rs 410 per share.

SBI shares were trading at Rs 309.40, up 0.4%, at 1.27pm on BSE.

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