State Bank of India shares gained 3 percent in morning on Thursday after global research house Morgan Stanley increased its price target for the stock to Rs 375 from Rs 350 earlier while maintaining overweight call.
The investment firm said it sees a turnaround on bad loans front in FY20 and will see a significant drop in provisions in second half of FY19.
Bad loans caused large losses in the previous financial year and the first half of the current financial year; expect this to turn around from the next financial year.
In the quarter ended September 2018, provisions towards non-performing assets (NPAs) were down by 39 percent to Rs 10,184.5 crore, from Rs 16,715 crore as on September quarter a year ago. Sequentially also, it declined 22 percent from Rs 13,038 crore.
The lower provisions helped the country’s largest lender to report profit (Rs 944.87 crore) during the quarter against street estimates of a net loss in Q2.
Morgan Stanley expects core earnings to pick-up going ahead. “We expects over Rs 30,000 crore profit in FY20 & Rs 37,000 crore in FY21.”
At 10:35 hours IST, the stock was quoting at Rs 292.35, up Rs 7.10, or 2.49 percent on the BSE.