Mixed Views on SBI’s Performance and Prospects

Mixed Views on SBI's Performance and Prospects
Mixed Views on SBI's Performance and Prospects
Mixed Views on SBI's Performance and Prospects
Mixed Views on SBI's Performance and Prospects

Mixed Views on SBI’s Performance and Prospects

Mixed Views on SBI’s Performance and Prospects

Mixed Views on SBI’s Performance and Prospects

The State Bank of India (SBI) has attracted a range of opinions from experts, with some viewing it as an attractive long-term investment and others advising caution.

In the year 2023, SBI’s share price has declined by more than 6%. In contrast, the Nifty Bank index and the Nifty 50 have seen gains of 3% and 9%, respectively, during the same period.

Global Brokerage Firm UBS Downgrades SBI

Global brokerage firm UBS has downgraded SBI’s stock from ‘buy’ to ‘sell.’ This decision was based on concerns about higher credit costs, narrowing margins, and expected declines in return on assets (RoA) and return on equity (RoE) by the financial year 2025. UBS has also reduced the target price of SBI from ₹740 to ₹530. The brokerage firm expects retail loan delinquencies to rise, leading to increased credit costs in FY25. It also anticipates that the repricing of deposits will limit margins to their current levels, thereby keeping net interest income (NII) growth in line with loan growth of 11-12%.

Positive Outlook from HDFC Securities

On the other hand, HDFC Securities has a ‘buy’ recommendation on SBI and has raised the target price from ₹750 to ₹790, suggesting a potential upside of 37%. HDFC Securities believes that SBI is on track to achieve a return on assets (RoA) of over 1% on the back of a healthy core operating profitability run rate, stable net interest margins (NIMs), and sustained productivity and efficiency gains. The firm acknowledges that the RoA and RoE levels in Q1FY24 cannot be straight-lined but expects SBI to deliver structurally lower credit costs and better return ratios, aided by a combination of traditional strengths and newly added competitive advantages.

Technical analysts have also shared differing perspectives. Some analysts caution against a short-term investment in SBI due to potential profit booking and bearish indicators on the weekly scale. Others see SBI as having support at the 200-day moving average (DMA) and consider it a suitable investment with a stop loss.

Expectations for SBI’s Q2 Results

Market expectations for SBI’s Q2 results are mixed. Some believe that SBI’s loan growth may gain momentum as system-wide credit growth increases. NIM is expected to remain stable, and revenue and profit after tax (PAT) are anticipated to see YoY growth. However, there are expectations of a sharp fall in trading gains and a likely decline in NIM. SBI’s asset quality is expected to improve, supported by a low stressed asset pool, with credit costs remaining under control.

These varied opinions reflect the diverse factors and considerations that impact an investment decision, highlighting the complexity of the financial landscape.

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