Shares of State Bank of India (SBI) and Kotak Mahindra Bank fell nearly 2% and 5%, respectively, in early trade on Monday after the lenders reported weaker-than-expected earnings for the March quarter. SBI shares ended 1% lower at Rs 790 while the Kotak Bank scrip closed at Rs 2,085, down 4.5%, on the BSE.
Despite the earnings miss, most brokerages remain optimistic about SBI’s long-term outlook. JPMorgan has retained its ‘overweight’ rating with a price target of Rs 915, viewing any short-term margin-related dip as a buying opportunity. CLSA, too, keeps the ‘outperform’ rating with an increased price target of Rs 1,050, although it has cut earnings estimates by 4% due to slower loan growth and some margin compression.
“Moderation in credit growth with relatively resilient margins, aided by a diversified loan mix and consistent strong asset quality, reinforces a robust operating profile. Treasury gains remain a catalyst,” said ICICI Direct in a report.
Analysts have downgraded Kotak Mahindra Bank after March quarter results. JM Financial Institutional Securities has downgraded the stock to ‘hold’ from ‘buy’ due to its weakening liability franchise, greater risk of NIM compression and higher expected credit costs stemming from increased slippages and a low contingent buffer. CLSA downgraded the stock to ‘hold’ from ‘outperform’ and described the Q4 performance as mixed, noting that the pre-provision operating profit missed estimates due to weaker net interest income and higher operating expenses.