If you have SBI (NSE: SBIN) share or are going to buy them, then this news is very important for you.
A top brokerage firm has also reduced its target on SBI from ₹ 841 to ₹ 742. After this news, State Bank shares fell 1.84 percent to Rs 803.50.
According to news, a top brokerage believes that SBI may face many challenges going forward, as its return on assets (ROA) is at its peak and the brokerage expects a reduction in the valuation of India’s largest lender.
Risk-Reward Profile ‘Unfavourable’
SBI’s risk-reward profile has turned ‘unfavorable’ as the bank’s ROA sustainability is facing ever-growing issues, Goldman Sachs wrote in its note.
The brokerage expects SBI’s ROA to decline from a peak of over 1% in FY24 to below 1% by FY26.
It also predicts a decrease in growth in loan volume going forward due to the increasing gap between the bank’s deposits growth.
Earnings Per Share Forecast Reduced By 3 Percent
The brokerage wrote in its note that the deterioration in MSME agricultural and unsecured portfolios could lead to an increase in costs for credit.
Because of these headwinds, the company has cut its earnings per share estimates for FY25-27 by 3%-9%.
The company has increased its target multiple from 1.2x to 1x, up from 1.2x before the change.
However, on the other hand, 49 analysts covering the State Bank of India, and 38 have a “Buy” rating on the stock. 6 analysts have stated “Hold” and 5 analysts with a “Sell” rating on the stock.
Quick Fact
Company name | SBI
| Brokerage firm | Goldman Sachs |
| Previous possible target price | ₹841 |
| New possible target price | ₹742 |
| Stock movement | Fell by 1.84% |
| Current stock price | ₹803.50 |
| ROA sustainability | Facing issues |
| Expected ROA decline (FY24-FY26) | From over 1% to below 1% |
| Loan volume growth | Expected to decrease |
| Deposits growth gap | Increasing |
| Risk-reward profile | Unfavorable |
| EPS forecast reduction (FY25-27) | 3%-9% |
| Target multiple | Reduced to 1x |
| Analysts covering SBI | 49 |
| Analysts with “Buy” rating | 38 |
| Analysts with “Hold” rating | 6 |
| Analysts with “Sell” rating | 5 |
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