Brokerage house Morgan Stanley has retained its ‘underweight’ rating on State Bank of India, while raising earnings estimates and price target.
Brokerage house Morgan Stanley has retained its 'underweight' rating on State Bank of India , while raising earnings estimates and price target.
The brokerage expects the bank's core lending business to be under pressure, but sees the bottomline being boosted by bond sale gains and lower provisions.
Morgan Stanley has raised the price target for the stock to Rs 1625 from Rs 1525 earlier.
Here are five reasons why the brokerage is not upbeat about SBI’s prospects in the near future:
* Revenue progression (loan growth plus fees) likely to be tepid given slowdown in economic growth.
* Asset quality will likely remain under pressure, given peak lending rates and slowing growth.
* Pressure on loan yields should continue while deposit rates stay sticky.
* Wage agreement provisions will cause salary bill to jump meaningfully.
* Core Tier I capital ratio is one of the weakest amongst Asian peers at 9.2% (F2013E, Basel III) even after factoring in proposed capital issuance by the government.
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