Revised target for SBI is Rs 2500: Gopinath Natarajan

Gopinath Natarajan, EVP, IIFL PReMIA in an interview with ET Now talks about SBI.

What is your call on SBI now? Does it seem like the market was overreacting or once and for all would you say the poison is out of the system and now we will see some bit of recovery coming in?

It was overall a disappointing set of numbers right from loan growth which was below our estimates. We saw contraction in net interest margins (NIMs) which was again more than what we expected.

The provisioning of pension which is close to about 7900 crore being taken off from reserves means having an impact negatively on the book value as well as the capital adequacy ratio.

So I guess quite a few negatives there given conservative multiple of about 1.3 times to book value which is currently about 1400. Rs 2500 is our target price on SBI.

We have downgraded the stock. We have cut the targets for about 20% post the numbers yesterday. More so going forward we also feel that there could be challenges in terms of maintaining the asset quality which SBI the management themselves have kind of raise concern about, so these are the things which one needs to watch out in the next couple of quarters going forward as far as SBI is concerned.

Do you think State Bank of India in a sense has really set the cat amongst the pigeons and other PSU banking stocks will also follow similar provisioning norms?

This was some kind of a surprise for us. One needs to see, this seems to be an impact purely on SBI. We have not seen PNB doing in and we have not seen any other private sector banks doing it. So one needs to see whether it is just an SBI kind of a phenomena or whether it is going to be a sector wide phenomena.

Yes, there is a fear of NIMs contraction continuing for the next one or two quarters. One needs to see how much of interest rate pass through happens in the next quarter or so, so these are all things which will weigh down on the stock at least in the medium term.