SBI: Retail investors press exit button

While the price of a stock is on the rise, would it be termed a smart move to book profit and exit it? Well, some investors in State Bank of India think so.

Retail investors have been in the sell mode on SBI in fiscal 2017. Close to a lakh of investors — 90,540 to be precise — have booked profits in the nation’s premier public sector bank’s stock. Their holding was 6.93 per cent at the end of March 2016 and reduced to 6.08 per cent in a year’s time.

During January-March 2017, ahead of the merger of SBI’s ancillaries (from April 1, 2017) with SBI, 38,035 small retail investors — categorised as those with individual share capital of up to ₹2 lakh — exited from SBI. Consequently, the holding of retail shareholders have fallen to 6.08 per cent from 6.46 per cent.

SBI is one of the star performers among the Sensex and Nifty 50 constituents in fiscal 2017.

From a low of ₹166.4 recorded on April 24, 2016, the stock hit a 52-week high of ₹298.65 on the BSE on April 5, 2017.

Analysts expect stress in asset quality to persist at SBI in FY17 along with elevated credit costs.

Fitch Ratings, in fact, in November 2016 had said it expects slippages in non-performing assets (NPAs) of banks to remain high, driven by stretched cash flows of highly-leveraged companies, continued proactive recognition of stressed assets by banks and the limited ability of banks in the current environment to recover exposures to large corporates that have slipped into NPAs.

In a report titled ‘2017 Outlook: Indian Banks’, it said the negative outlook on the banking sector suggests there may be more downside risks for banks’ viability ratings if the risks of deteriorating asset quality and weak earnings are not counterbalanced by larger capital injections. Going forward, analysts at Nomura believe that credit cycle deterioration is done with, and adjusted books are unlikely to be revised down. “But slower growth will constrain core pre-provision operating profit (PPOP) for corporate banks even in FY18,” the analysts added. Nomura maintains its buy stance on the stocks with a target price of ₹330.

SBI’s five associate banks — State Bank of Bikaner and Jaipur, State Bank of Travancore, State Bank of Patiala, State Bank of Mysore and State Bank of Hyderabad — had merged with SBI from April 1. With the merger, SBI could break into the list of top 50 banks of the world, in terms of asset size.

SBI Chairman Arundhati Bhattacharya recently said the consolidated balance sheet of the merged entity would be ₹32 lakh crore, up from ₹23 lakh crore now.