State Bank of India (SBI) reported a mixed Q3FY25 performance, with strong loan growth and asset quality but soft net interest margins (NIMs) impacting profitability. HSBC downgraded its target price to Rs 800 from Rs 880, maintaining a ‘Hold’ rating, citing misses on loan growth, NIMs, and cost ratios. The brokerage expects muted EPS growth over FY25-27 due to continued NIM pressure, leading to a 1.5-5.2% cut in FY25-27 EPS estimates.
Morgan Stanley also maintained an ‘Equal-weight’ rating with a target price of Rs 865, emphasizing that while asset quality remains strong, core pre-provision operating profit (PPoP) margin progression remains weak. SBI’s NIMs declined by 13 bps QoQ, leading to a 3% miss on net interest income (NII). However, credit growth remained strong at 14% YoY, reflecting solid demand for loans, although deposits lagged behind.
Nomura, in contrast, remained bullish on SBI, maintaining a ‘Buy’ rating with a target price of Rs 1,000. The brokerage noted that SBI delivered a mixed quarter, with soft NIMs but strong loan growth and asset quality improvements. It expects a strong return on equity (RoE) outlook, making valuations attractive. SBI’s lower credit costs aided profitability, despite a core PPoP miss due to weaker NIMs and fee income.
Bernstein took a neutral stance, assigning a ‘Market Perform’ rating with a target price of Rs 900. It pointed out that margin pressures drove down RoA to 1%, even though asset quality remained stable. Loan growth at 14% YoY was robust, but deposit growth was weak, mainly driven by term deposits rather than CASA. While NIMs declined, SBI’s net operating income (NOI) normalized, indicating some stability ahead.
