Goldman Sachs has downgraded State Bank of India (SBI) from a “Neutral” rating to “Sell,” citing multiple challenges ahead for the bank. The firm has also cut SBI’s target price to ₹742 from ₹841, reflecting a cautious outlook on the bank’s performance.
According to Goldman Sachs, SBI’s return on assets (ROA) is expected to peak at 1% in FY24 but will likely fall below this level by FY26. The bank is facing a potential de-rating in its valuation due to lower loan growth and widening gaps between deposit and loan growth.
Over the last four quarters, SBI has been losing market share in deposits, a trend that could continue. As a result, Goldman expects lending growth to slow down and has lowered its growth estimates by 100-400 basis points for FY25-FY27. Additionally, rising slippages in the MSME, agriculture, and unsecured loan portfolios are expected to push up credit costs.
The bank’s earnings per share (EPS) for FY25-FY27 have also been revised down by 3%-9%. With these factors in mind, Goldman has reduced SBI’s target multiple from 1.2x to 1x, signaling a more conservative outlook for the bank’s future performance.
Shares of SBI closed 0.18% higher on NSE at Rs 818.00 (Thursday 3:30 PM).