State Bank of India (SBI), India’s largest lender, experienced a sharp decline in its shares, dropping as much as 3.3% to a low of Rs 984 on the BSE Monday. This marked a 10% fall over the past two trading sessions following the release of Q4 results.
Q4 Financial Highlights
The bank reported a 6% year-on-year increase in standalone net profit, reaching Rs 19,684 crore for the March quarter, up from Rs 18,643 crore in the prior year. Net interest income (NII) rose 4% year-on-year to Rs 44,380 crore, reflecting the gap between interest income and expenses.
Provisions decreased significantly to Rs 2,872 crore from Rs 6,442 crore a year ago. Provisions for non-performing assets also declined to Rs 3,140 crore, down from Rs 3,964 crore.
Pressure on Margins
Net interest margins faced compression during the quarter. Domestic NIM stood at 2.93%, a drop of 21 basis points year-on-year and 18 basis points quarter-on-quarter. Whole-bank NIM for Q4 FY26 reached 2.81%, while full-year domestic NIM for FY26 was 3.03%.
Analyst Outlooks and Ratings
Bernstein upholds an ‘Outperform’ rating on SBI with a target price of Rs 1,300, indicating 27.5% upside potential. Loan growth remained robust at 17% year-on-year, fueled by SME, agriculture, and corporate segments. Sequential slippages rose but appear largely seasonal and agriculture-related. Return on assets dipped to 1.07% due to NIM pressures and treasury losses. Management reaffirms FY27 guidance of 13-15% loan growth and domestic NIM above 3%, with improving CET1 ratios and steady asset quality.
Citigroup retains a ‘Buy’ rating but adjusts the target price to Rs 1,230 from Rs 1,265. Q4 results suffered from NIM contraction and softer fee income, though credit costs stayed controlled despite higher slippages. FY27 guidance includes 13-15% loan growth and ROA over 1%. Earnings estimates for FY27 and FY28 trimmed by 3-4% due to revised NIM projections.
Morgan Stanley’s View
Morgan Stanley keeps an ‘Equal-weight’ rating and lowers the target to Rs 980 from Rs 1,000. Headline earnings exceeded expectations, but NII and NIM missed targets significantly, with NIM (excluding IT refund) falling 18 basis points quarter-on-quarter, 16 basis points below forecasts. Lower yields stemmed from increased treasury bill-linked corporate loans. FY27 and FY28 NIM forecasts cut by over 20 basis points, with EPS estimates reduced by 4% and 2% respectively. Margin recovery hinges on sustainability.
Motilal Oswal Remains Optimistic
Motilal Oswal sticks with a ‘Buy’ rating and Rs 1,300 target, offering 27.5% upside. The quarter showed mixed results, with NII decline and NIM contraction from repo rate effects, MCLR reductions, and shifts to treasury bill-linked corporate loans. The bank anticipates domestic NIM above 3% ahead, backed by yield improvements and measures. Treasury profits weakened amid rising bond yields. Credit growth guidance holds at 13-15%, with resilient asset quality despite minor slippage uptick tied to seasonal PSU bank trends.
