SBI's earnings growth may taper off in the near-term, warn analysts

State Bank of India (SBI) stock outlook: Analysts at Nomura termed SBI's sharp NIM decline "disappointing" as the lender's YoY NIM expansion of 31bp significantly trailed private banks.

State Bank of India’s earnings growth may turn lacklustre in the near-term, warn analysts. This, they said, could be due to margin compression and likely lower fee income over the next one year.

"While the cost of deposits is repricing sharply across the system, there will be relatively lower yield expansion going ahead as most of the back-book has been repriced and there is a high competitive pressure on yields. We believe it will be difficult for SBI to prevent net interest margin (NIM) compression," said analysts at HSBC while downgrading the stock to ‘Hold’ from ‘Buy’.

They