Brokerages keep faith in SBI on improving asset quality

Mumbai: Brokerages have maintained a bullish view on State Bank of India (SBI) following the bank’s fourth quarter results, enthused by ebbing asset quality concerns.

Jefferies, Kotak Institutional Equities, Motilal Oswal, PhillipCapital and Prabhudas Lilladher have maintained a ‘buy’ rating on SBI shares. While others have maintained target prices, Jefferies, BOB Capital Markets and Prabhudas Lilladher have raised the target price 2-18 per cent. BOB Capital has upgraded the stock to ‘buy’ from ‘add’.

“With negligible balance sheet risk, we believe that State Bank of India is well-positioned to deliver strong earnings growth for FY20-21, which could see RoAs (return on assets) moving closer to 1 per cent,” said Kotak Institutional Equities.

SBI on Friday posted a profit of Rs 838.40 crore for the March quarter against a loss of Rs 7,718.17 crore in the corresponding quarter last year, but the profit figure was below analysts’ estimates. Asset quality of SBI improved with percentage of gross non-performing assets easing to 7.73 per cent from 8.71 per cent on a sequential basis. Net NPA improved to 3.01 per cent from 3.95 per cent a quarter ago.

“Diminishing stressed pool of loans, aided by an expected recovery of bad loans under NCLT, (National Company Law Tribunal) will bring down GNPA/NNPA ahead. We expect FY20 to stage a recovery led by an improvement in net interest margins (NIM) and a rebound in credit growth to around 12-13 per cent, accentuated by portfolio acquisition from NBFCs,” said PhillipCapital.

Shares of State Bank of India ended up 3 per cent at about Rs 308.05 on Friday after the release of the fourth quarter results.