SBI a buy for brokers despite big loss in Q4; some cut target price

Brokerages remain upbeat on India’s largest lender State Bank of India despite it reporting a Rs 7,718-crore loss for the quarter ended March 2018.

Although several brokerages cut target prices after the higherthan-expected loss, they remain bullish as they feel that the stress on the bank’s book is reducing. They are also optimistic on the asset quality front going forward.

“The bank is relatively better positioned among peers…With 36 per cent of the industry under potential PCA (prompt corrective action) framework and stress recognition done, we believe SBI will see strong earnings momentum henceforth with major delta coming from reduced credit cost,” said Edelweiss Securities in its note.


Moreover, recovery from National Company Law Tribunal cases could provide triggers for upside, analysts said. They also find the valuations reasonable at current levels.

“The quarter saw bank recognise a substantial part of its stressed asset pool as delinquent. Resultantly, the share of watchlist portfolio now stands reduced to 1.3 per cent of loans,” said Centrum Broking. “Commentaries on asset quality remain soothing; capital position strong and subsidiaries profitable,” added Centrum.

SBI is still among preferred PSU picks with its stronger CASA (current and savings account) franchise, better asset quality and capitalisation, noted CLSA.

However, Macquarie has stayed neutral on the stock. Macquarie said 40 per cent of corporate slippages coming from outside the identified pool of stress remains a key dampener and undermines previous guidance.