Update on the Indian Equity Market:
On Wednesday Nifty closed -4.0% lower at 8,253. Among the sectoral indices NIFTY IT (-5.5%), NIFTY Bank (-4.9%), NIFTY PVT Bank (-4.9%) closed lower. None of the sectors closed on a positive note. Tech Mahindra (-9.4%), Kotak Bank (-8.7%), and AXIS Bank (-6.2%) led the losing stocks. Hero Motocorp (+2.5%), Bajaj Auto (+1.0%), Bajaj Finance (+0.5%) were among the top gainers.
Excerpts from an interview of Mr Dinesh Khara, MD- Global Banking and subsidiaries of State Bank Of India with CNBC-TV18 dated 31st March 2020:
- Speaking on recent measures by RBI Mr Khara said the steps taken by RBI have mitigated the stress which the bank would have seen on account of the 21-days lockdown which has been announced.
- However, the only thing could be the special mention accounts – SMA-I and SMA-II, which normally has a tendency of seeing the recovery towards the latter half of the month. So there, the bank might face some kind of a situation but that also is being resorted through follow up mechanism.
- He added the pain has been addressed to an extent of about 90 %.
- Speaking about the moratorium, he said everybody is entitled to the moratorium unless they opt-out.
- For the next quarter, on the margin front, the bank has not looked at this point as the issue is evolving.
- On asset quality, Mr Khara said the bank is in the process of evaluating the impact and it would be too early to say anything.
- On SMEs, SBI announced an emergency package for SMEs, which is 10 per cent of the working capital for all the accounts which are performing. This package was announced even before the steps taken by RBI.
- Speaking about loan growth he said after the lockdown is taken off, there would be pent-up demand and to meet that demand, the corporates might go for shoring up their working capital too. Apart from that, there is bound to be some kind of reconstruction effort post COVID-19 and the bank is confident that will also bring in opportunities for credit growth.
Consensus Estimate: (Source: market screener and Investing.com websites)
- The closing price of SBI was ₹ 187/- as of 01-April-2020. It traded at 0.7x/ 0.6x/ 0.5x the consensus Book value per share estimate of ₹ 249/277/312 for FY20E/ FY21E/ FY22E respectively.
- The consensus average target price for SBI is ₹ 384/- which implies a PB multiple of 1.2x on FY22E BVPS of ₹312/-.