Shares of State Bank of India (SBI) traded in the negative territory on December 11 and looked on course to extend the losing run into the fifth consecutive session.
The largest public sector lender on December 10 reported bad loan divergence of Rs 11,932 crore for the last financial year, the country's largest lender said in a notification to exchanges.
SBI also reported divergence of Rs 12,036 crore in provisioning for the financial year ended March 2019.
The gross non-performing assets (NPAs) reported by the bank stood at Rs 1.73 lakh crore as on March 31, 2019. However, gross NPAs as detected by RBI was at Rs 1.85 lakh crore for the period.
Read more: SBI reports bad loan divergence of Rs 11,932 crore for FY19
Global financial firm Morgan Stanley has 'equal-weight' call on the stock with a target price of Rs 330 and said it awaits the details on the nature of this provisioning divergence
"It will be an incremental negative if the bank will have to provide for this and will also partially offset large NPL recoveries expected from Essar Steel," Morgan Stanley said.
Global brokerage firm Macquarie said SBI's divergence is 7 percent for FY19 GNPA and even though it is not a large number, the key number to track would be the return on assets (RoA).
"Though the impact at the GNPA level is marginal, the provisioning impact on Q3FY20 is likely to be Rs 4,650 crore due to this divergence. To put in context, this is almost 40 percent of the quarterly run-rate of Rs 11,000 crore of provisions," Macquarie said.
"We believe management’s guidance of touching 1 percent RoA by FY21E is far-fetched. SBI will continue to be beleaguered by SME and agri NPLs and such “one-off” accounts are bound to recur every now and then," Macquarie added.
Macquarie has maintained a neutral call on SBI with a target price of Rs 320.
As of December 10 close, shares of SBI has gained 6 percent on BSE in Calendar 2019 against nearly 12 percent rise in equity benchmark Sensex.
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