CLSA has maintained its “outperform” rating on SBI with a price target of ₹1,275 apiece. CLSA’s target is among the top 10 on the street for India’s largest lender.
It said SBI’s net interest margin (NIM) performance for the fourth quarter was quite divergent from its peers and it disappointed investors.
CLSA said it checked previous data to analyst if such instances had occurred before if this was the first time. “Interestingly, in each of the past four years, SBI has missed on NIMs in one of four quarters,” CLSA said.
The stock took a temporary beating, only to rebound again after a quarter, the brokerage said, adding that investors should use the recent 10% – 12% correction in the stock to buy it.
The brokerage added that SBI has 19% of funding (around 30% of them are deposits) that were raised pre-March and are at a higher cost. Repricing these deposits should improve NIM by eight basis points.
Lastly, the brokerage highlighted other levers such as a reduction in DIGGC premium expense that could result in earnings per share (EPS) upgrades. Deposit Insurance and Credit Guarantee Corporation (DIGGC) is a wholly-owned subsidiary of the Reserve Bank of India, that insures all bank deposits in India, including savings, fixed and recurring deposits.
Of the 49 analysts who have coverage on the stock, 43 have a “buy” rating and six have a “hold” rating.
Shares of SBI are trading 0.3% higher on Wednesday at ₹971.8. The stock is down 13% in the last one month, as a result of which it has also turned negative on a year-to-date basis.
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