The share price of State Bank of India fell 2.5% to an intra-day low of Rs 733.40 after reporting its Q3 FY25. Most brokerages have raised concerns about the sharp 13 bps decline in the bank’s interest margins compared to Q2FY25. The stock has been one of the big losers on Nifty in intra-day trade. Here are three reasons why-
Nuvama cuts target price marginally
The brokerage firm Nuvama Institutional Equities cut the target price to Rs 950 from Rs 1,026. While lower credit costs helped SBI’s Q3FY25 net profit, its net interest margin and operational expenditure levels missed street estimates. Nuvama highlighted that higher borrowings against excess SLR to meet liquidity is a concern. According to them, the key risks include, “any increase in credit cost from the current lows will hurt earnings and Increasing competition and lower share of Xpress loans may put pressure on NIM.”
They however maintained a ‘Buy” rating as asset quality remained strong with a QoQ drop in slippage. Specific credit cost fell sharply by 37% QoQ. The bank also reversed Rs 900 crore on a standard restructured loan and Rs 400 crore of other provisions. The other key positive that they are basing the Buy call on includes the management confidence in “oan growth coming in at 14–16% for FY25E, a rebound in Xpress credit, double-digit deposit growth, a stable NIM and an RoA of at least 1%.”
Motilal Oswal on SBI: Moderation in margins a worry
The brokerage firm Motilal Oswal Financial Services slashed its earnings estimated by 1.7% for FY26 and 3.4% for FY27. It believes that the bank may deliver a return on assets of 1% by FY27 and a return on equity of 16.8%. It has maintained the ‘Buy’ rating on the stock, with a target price of Rs 925. “SBI reported a mixed quarter as the provisioning reversal boosted earnings, while margins moderated 13 bps QoQ. Other income too reported a miss, affected by weak treasury/forex performance,” said Motilal Oswal.
Elara Securities cuts target price by over 8%
In the near term, the country’s largest government bank is facing sectoral headwinds. Following it, Elara Capital cut the target price to Rs 885 from Rs 965 earlier, maintaining an ‘Accumulate’ rating. “A narrower discount to a few larger private banks (Axis Bank) suggests that near-term price catalysts could be limited and contingent on macro tailwinds,” said Elara Securities.
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