State Bank of India�(SBI) reported a second consecutive net loss of Rs 7,718 crore for the quarter-ended March on Tuesday due to a surge in provisions and bad loans. This was the second highest quarterly loss figure reported by any bank after Punjab National Bank reported a Q4 FY18 loss of Rs 13,417 crore last week. However, most global brokerage firms maintain a Buy rating on the stock.
A Reuters poll had estimated the bank to report a loss of Rs 1,270.5 crore as against a net profit of Rs 2,814.82 crore in the same quarter of last year. In Q3 FY18, SBI had reported a loss of Rs 2,416 crore. Provisions (and contingencies) surged to Rs 28,096 crore during the reporting quarter, more than twice the amount reported in the corresponding quarter of last year at Rs 11,740 crore.
Brokerages feel stress on the bank��s books is reducing and recognition of most non-performing assets (NPAs) has been undertaken which improves outlook for upcoming quarters. Among global brokerage firms which have come out with reports post its Q4 result, Bank of America Merrill Lynch (BofAML) has the most aggressive target price of Rs 380 per share, which translate in an upside of about 49 percent from current levels.
Here��s what most global brokerage firms have said post the bank��s Q4 result:
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Credit Suisse maintains an underperform rating on SBI post Q4 results but slashed its target price to Rs 322 from Rs 381 earlier. The residual stress is contracting, but further capital infusion might be required, said the note.
Gross NPAs have peaked at 10.9 percent this quarter. The global investment bank cuts FY19 EPS by 3 percent and FY20 EPS by 20 percent on higher provisions.
Bank of America Merrill Lynch: Buy | Target: Rs 380
BofA-ML maintains a buy rating on SBI post Q4 results and recommends a target of Rs 380. It looks like recognition of NPAs is now behind us and the recovery and loan growth is likely to drive sharp rebound.
The March-quarter weakness was led by new NPL norms, as well as treasury losses. But, we need to understand that SBI is the key beneficiary of asset quality cycle, which is positive.
Jefferies: Buy | Target: Rs 355
Jefferies maintains a buy rating on SBI post Q4 results with a target of Rs 355. The Street may like that gross stress has likely peaked. The core profitability should see a cyclical improvement. The global investment bank expects RoE to reach 15-16 percent only by FY21E.
Citigroup: Buy | Target: Rs 325
Citigroup maintains a buy rating on SBI post Q4 results with a target price of Rs 325. Higher slippages lead to P&L loss, and it looks like most of the stress is now recognised as NPA. Credit costs are likely to moderate, and the growth should improve from current level.
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