SBI slides 4% after first quarterly earnings loss in 17 years
The December quarterly losses were a result of a surge in provisions on bad loan divergence and a marked reversal in treasury income paced up by hardening bond yields.
The lender reported a net loss of Rs 2,416 crore for the December quarter compared with a Rs 1,820 crore profit in the year-ago quarter.
Following the results, the stock fell 3.85 per to hit a low of Rs 285 on the BSE.
"While the core PPOP trajectory was muted, 9M FY18 has seen significant NPA recognition related reversals. With lower interest reversals, rate cycle turning and capital raising/government infusion, we expect core PPOP trend to improve meaningfully from FY19F and we expect normalised ROEs of 12 per cent by FY20F. We thus maintain our BUY rating with target price of Rs 385," Nomura India said in a note.
Nirmal Bang Institutional Equities noted that loan slippage ratio for the lender spiked to 5.3 per cent on closure of the RBI divergence gap. The management has guided for 10 per cent credit growth for FY19.
"We have marginally modified our legacy estimates for FY18/FY19 and retained Buy rating on SBI, decreasing our target price to Rs 364 (from Rs 386 earlier), valuing the stock at 1.4x FY20E P/ABV and Rs 65 for subsidiaries," the brokerage said.