Adverting to the concerns of SBI's lender's stress levels and it's desire to grow its loanbook, the global investment banker, Goldman Sachs, has downgraded State Bank of India (SBI) to "sell" from "neutral" and cut its target price to Rs 1,900 from Rs 2,420.
According to Goldman SBI may post a "tough" year in fiscal 2014 given expectations the lender will continue to face margin pressure over its "aggressive" lending strategy.
Further the issues like stress loan formation remain elevated which is much more evident if the economy further weakens and also SBI's operating expenses increasing due to provisions for pensions.
Recently, SBI posted its first quarterly net profit drop in two years. It posted a net profit of Rs 3299 crore in the quarter ended March, compared with Rs 4050 crore in the year ago period. Net interest income, the difference between interest earned and interest expended, fell 4.4 percent to Rs 11,080 crore.
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