Key Takeaways
State Bank of India (SBI.NS) shares fell nearly 4 percent on Monday, wiping out ₹44,722 crore in market value, after the lender missed quarterly profit estimates and warned that a prolonged war in Iran could weigh on loan growth.
"At this current level, there are some concerns on growth," Soumya Kanti Ghosh, Group Chief Economic Adviser at State Bank of India, said on CNBC-TV18, adding that "some steps are required to cushion us from the West Asia crisis."
While SBI reported a 4 percent beat on pre-provisioning operating profit, according to CLSA, its top line was weak. Net interest income (NII) missed consensus estimates by 5 percent, driven by a sharper-than-expected 17 basis point sequential compression in net interest margin (NIM). UBS noted that loan yields dropped due to repo rate cuts and changes in loan composition.
The results highlight a challenging environment for India's largest lender, even as some metrics showed strength. CLSA called the 17 percent year-over-year loan growth "best in class," and deposit growth accelerated to 11 percent from 9 percent year-over-year. Still, the warning on geopolitical risks and the margin squeeze have given investors pause. SBI management guided for loan growth of 13 to 15 percent for fiscal year 2027.
Analysts are divided on the path forward. CLSA maintained its Outperform rating with a price target of Rs 1275, pointing to strong growth and a healthy quarter apart from the margin dip. In contrast, UBS reiterated a Neutral rating and a Rs 1080 price target, arguing that risk-reward seems fair at current valuations and that the bank's return on assets will face downward pressure as treasury gains and credit costs normalize.
The decline puts the stock at its lowest since early April, testing a key support level. Investors will be closely watching for any monetary measures to cushion the economy from geopolitical shocks, which SBI's Ghosh alluded to as a possibility, similar to steps taken in 2013.
This article is for informational purposes only and does not constitute investment advice.
