SBI share price plunges after Morgan Stanley cuts target price on India’s largest PSU bank

Shares of India’s largest state-run lender SBI plunged on Wednesday morning, after global firm Morgan Stanley slashed its share price target. SBI shares plunged more than 4.6% to hit the day’s low at Rs 288.75 on BSE. Morgan Stanley said that the upside on the shares remains limited given uncertainty on Asset quality and Net Interest Margin. The global firm noted that the recent tax rate cut outweighs lower margins. Morgan Stanley has raised the FY21, FY22 EPS estimates by 5% each.

In the Apr-June quarter, State Bank of India (SBI), reported a net profit of Rs 2,312 crore, beating analyst estimates. Notably, the PSU bank had reported a net loss of Rs 4,875.9 crore in the corresponding quarter of the previous fiscal year. The firm’s asset quality also saw improvement with gross non-performing assets (GNPA) at Rs 1.68 lakh crore, down 21% from Rs 2.13 lakh crore reported in the quarter ended June-18. In the previous fiscal, the firm had reported GNPA’s of Rs 1.73 lakh crore in Q4FY19. Morgan Stanley has downgraded the stock to equal-weight from over-weight earlier. The research firm has a target price of Rs 330.

State Bank of India cut its lending and deposit rates across all tenures earlier this month. The PSU giant said that it has reduced lending rates by 10 bps across all tenors. The one-year marginal cost of lending rate (MCLR) will stand reduced to 8.15% from 8.25% with effect from 10 September. This is the fifth consecutive cut in MCLR in the current fiscal year 2019-20. During the same period, RBI has the cut repo rate by 85 basis points. Notably, the firm has also reduced its deposit rates by 20-25 basis points and bulk deposit rates by 10-20 basis points across tenures.

State Bank of India