Had an investor sold State Bank of India at the closing price on Friday and bought the share back at its closing price on May 18, he would have pocketed a cool Rs 293 — a gain of 11 per cent — for every share.
The SBI futures has been adding fresh short positions during the last three days. The counter added closed to 18 lakh shares since Friday, most of which were on the short side. The SBI futures closed at Rs 2337.05 on the NSE.
Huge increases in future pension liabilities and provisioning for bad debt or NPAs — as they are called — led to this stock's price erosion between the two dates. The stock fell from Rs 2,674.80 to Rs 2,355.70.
Analysts reaction to this move, however, is mixed.
While Morgan Stanley is underweight on the stock and Anand Rathi has given a sell call, IDFC, UBS, Citi, HSBC and Prabhudas Lilladher have asked clients to buy on price dips on the premise that the worst is over for SBI.
“SBI's balance sheet has grown from approximately Rs 4 lakh crore to Rs 9 lakh crore in a short span of three years and the strategy to have financed assets at their peak value is questionable. Any correction in the price of these assets that have been financed could turn them into NPAs,” said Mr Mansingh Deshmukh, Head Equity JHP Securities.
Experts say that the bank's growth will slow down this fiscal due to poor credit offtake, higher interest rates, increase in cost of operations and a possibility of funds for growth being unavailable if its rights issue does not materialise this fiscal.
“Clarity on the rights issue is very important for the stock doing well in the near future,” said a banking analyst with an NBFC. “With a 54 basis point contraction in its net interest margin and a deposit rate hike, it looks as if even a base rate hike would not be able to compensate for the overall increase in costs.”
The street is worried because the bank had not made provisions for teaser loans every quarter, as other PSU banks, and feel that this could have a bearing on valuations.
A statement in a Citigroup Global Markets report on SBI said: “Lack of transparency and consistency in accounting, disclosures is disappointing and has precedence (the bank has done this before, taking making a Rs 4,300-crore write-off in 2008 also).”