The price of State Bank of India (SBI) stock fell 2.67% on Monday to Rs 288.50 following the lender reporting a weak third-quarter earnings on Friday after the market hours. Being the first trading day after the quarterly results were released, the stock took a battering early in the day, declining 3.8% intra-day. The SBI stock was the worst performer in the Sensex for the day.
On Friday, SBI had reported a standalone net loss of Rs 2,416 crore for the quarter ended December 2017, this was the first quarterly loss in the past 19 years. Had it not been for a Rs 4,705-crore tax credit, the loss would have been even higher. This clearly didn’t go down well with investors. Analysts had expected the lender to post a profit of over Rs 2,000 crore for the quarter, based on data collated by Bloomberg.
SBI’s provisions more than doubled on a year-on-year (y-o-y) basis to Rs 18,876 crore in Q3 FY18. Other income slipped 16% to `8,084 crore. Nomura, in a note to investors, said while core pre-provision operating profit (PPOP) trajectory was muted, 9M FY18 has seen significant NPA recognition related reversals.
“With lower interest reversals, rate cycle turning and capital raising/ government infusion, we expect core PPOP trend to improve meaningfully from FY19F, and we expect normalised ROEs of 12% by FY20F,” the note added.
Shares of SBI declined 2.1% on the BSE in intra-day trade on Friday, but recovered to end at `296.4, ending 1.7% lower, pointing to some apprehension about the performance, details of which were released after market hours.
Since the start of 2018, SBI’s share price has declined 6.9% against a gain of 0.72% on the Sensex. “SBI will do well on a one-year basis because the performance of the core business remains good. The major term stressed assets had been identified. Their earnings should recover in a year as their provision requirement will come down,” said an analyst requesting anonymity.