State Bank of India’s shares are in focus after it cut the interest rates on many retail as well as business loans.
The lender will provide the home loans hooked to the External Benchmark Rate (EBR) for 8.9% (RBI repo rate of 6.25% and an additional 2.65% for spread). It was 8.25% to 9.2%, depending on the borrowers’ credit score.
The maxgain home loan (overdraft) option has an interest rate between 8.45% and 9.4%. Top-up loans are offered at rates varying from 8.55% to 11.05%, whereas top-up (overdraft) loans have rates ranging from 8.75% to 9.7%. Loans against property have interest rates ranging from 9.75% to 11.05%, while fixed reverse mortgage loans for seniors are set at 11.3%.
This came after the Reserve Bank of India last week slashed the repo rate from 6.50% to 6.25%. This was the first interest rate cut by the lender of last resort in five years. The cut came to help lift the slowing GDP growth, which was at a four-year low of 6.7%. By making borrowing cheaper the central bank will stimulate consumption or economic activity. This will encourage spending and investment.
Nuvama has Buy recommendation on State Bank of India
Key brokerage house Nuvama has put a Buy recommendation on SBI after the Management expressed confidence about clocking loan growth coming to 14–16% for FY25E. A rebound in Xpress credit, double-digit deposit growth, a stable NIM and a RoA of at least 1% are some pf the other reasons for the brokerage maintaining the recommendation with a revised target price of Rs 950/share.
The Chairman guided NIM to stay stable at the current level of 3% and the bank’s asset quality remained strong with lower credit cost and slippage. Nuvama, in its report, highlighted how the slippage declined further to 0.5% of lagged loans from 0.6%, and is among the lowest. Specific credit cost fell sharply by 37% QoQ on a low base while the bank also reversed Rs 900 crore on a Covid restructured loan that was upgraded and Rs 500 crore of other standard provisions. Total credit cost stood at a low 9 bp from 47 bp QoQ. The management has also guided for a normalised credit cost of 50 bps in the near term.
SBI’s performance in Q3
It reported an 84% jump in standalone net profit to Rs 16,891 crore in Q3 FY25 against Rs 9,164 crore in Q3 FY24. The lender’s interest income grew to Rs 1.17 lakh crore in Q3 FY25 compared to Rs 1.06 lakh crore in the same period a year ago. SBI’s total income increased to Rs 1.28 lakh crore for the reporting quarter of the current financial year, compared to Rs 1.18 lakh crore in the same period a year ago.
SBI Vs Nifty 50
SBI’s share price has fallen 2.77% in the last five trading days. It has erased almost 6% of investors’ wealth in the past one month and over 11% in the last six months. The share price of SBI has eroded value by 5% in the past one year.
To compare, the benchmark index, Nifty 50 has wiped out 2.3% of investors’ wealth in the last five trading days. It has declined by 1.18% in the last one month and 6.7% in the previous six months. However, the index has given a return of 3.65% in the last one year.