Most brokerages maintained their ratings on State Bank of India after it posted its first-ever quarterly loss, even as they expect the future earnings to remain subdued on the back of high provisions and deteriorating asset quality.
State Bank of India, on Friday, had reported a quarterly loss for the first time in at least 17 years on the back of an increase in provisions for bad loans and declining treasury income.
While the third quarter performance was a disappointment,brokerage Edelweiss said overall stress pool of the lender is contained. Motilal Oswal, in response to the weak set of results, cut its earnings estimates for the next three years. Axis Capital too trimmed its forecast, in the light of elevated provisions.
Here are the key takeaways from brokerage notes:
- Maintained ‘Buy’ with price target of Rs 420
- The third quarter performance disappointed in terms of revenue and slippage
- Slippages high, but overall stress pool contained
- Divergence and investment depreciation played spoilsport
- Operating metrics seem to have bottomed out this quarter
- Expect net interest margin to sustain or improve from the current levels
- Maintained ‘Neutral’ with price target of Rs 320
- Third quarter results missed on asset quality and treasury income
- Slippages were up due to NPA divergence arising from the RBI inspection report
- Loan growth remained subdued due to contraction of corporate loan book
- Expect a weak set of results to remain an overhang on the stock in the near-term
- Maintain Buy, but lowered price target to Rs 375 from Rs 415
- Asset quality disappointed in third quarter; expect gradual recovery over financial year 2019
- Core portfolio performance remains healthy
- Purging of the residual stressed assets will remain an overhang in near term
- Cut FY18, FY19 and FY20 earnings’ estimates by 75 percent, 20 percent, and 22 percent respectively and build in government capital infusion of Rs 8,800 crore
- Maintained ‘Buy’, but lowered price target to Rs 350 from Rs 380 earlier
- Trim FY18-19 estimates by 20-60 percent to factor in the third quarter loss and elevated provisions
- Adjusted book values are now lower by nearly 20 percent
- Will be tracking the deliverables on growth, recoveries and write back of provisions from NCLT cases which may give an upside to estimates