Shares of State Bank of India (SBI) fell over 4 percent on Monday after brokerages cut the price targets of the stock following lower-than-expected quarterly profit.
SBI reported net profit at Rs 2,312 crore in the June quarter as against the loss of Rs 4,875.85 crore in the corresponding quarter last year. About 22 analysts, on an average, had expected the Mumbai-based lender to post a profit of Rs 4,083 crore, Refinitiv data showed.
Brokerages including Jefferies, CLSA, Citi, Kotak and IDFC have slashed their target price on the stock for a 12-month period due to elevated stress in the balance sheet
Gross slippages for June quarter increased sharply by 62.38 percent YoY to Rs 16,212 crore and 116.01 percent sequentially, leading to an increase in slippage ratio to 2.83 percent in Q1FY20, from 1.39 percent in Q4FY19.
"Agri slippages were high during the quarter. We are still hopeful by March 2020, we will bring slippage ratio to 2 percent or below," said Rajnish Kumar, Chairman, SBI.
Meanwhile, provisions for bad loans fell significantly by 32.80 percent quarter-on-quarter to Rs 11,648.5 crore in Q1.
Though most brokerages remained bullish on the stock, they have cut their price targets.
CLSA has a 'buy' call on the stock but cut its target to Rs 380 per share from Rs 420 earlier whereas Citi, which also a 'buy' call on the stock, reduced its target price to Rs 400 per share from Rs 415 earlier.
Jefferies also slashed the price target to Rs 370 per share. "The quarter did not have much to cheer about," Jefferies said in a note.
According to Kotak Institutional Equities, higher slippage from agriculture and SME is seasonal in nature and less worrying. The brokerage maintained a 'buy' call on the stock but cut its target to Rs 390 per share from Rs 410 earlier.
Meanwhile, IDFC Securities cut earnings and target price to Rs 365 per share but maintained 'outperform' rating citing inexpensive valuation.
At 9:40 AM, the stock was trading 3 percent lower at Rs 398.50 as compared to a 1.5 percent (553 points) fall in the S&P BSE Sensex index.
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