SBI confident of govt funds; but analysts wary about stock
All brokerages feel the state bank needs to go in for a rights issue this fiscal itself if it wants to being in additional capital.
Even though rating agency Moody's downgraded the mighty State Bank of India by one notch to D+ on grounds that the public sector bank's biggest shareholder- the government - is unable to pump in additional money, the bank's chairman is confident that the government will inject up to $2 billion this fiscal.
Shares in the country's dominant lender continued to slide, falling as much as 3.9 percent to their lowest in more than two years and helping drag the broader market into negative territory.
"We have taken note of this message and recapitalisation, we are hopeful, will be completed by the end of December 2011 and at the most, if it is stretched, it will go to March," Chairman Pratip Chaudhuri told a media briefing.
He said the bank has outlined to the government scenarios under which it would need Rs 14,000 to Rs 21,000 crore ($2.84 billion-$4.26 billion) of state capital over five years, and would be "comfortable" with Rs 3,000 crore to 10,000 crore of fresh government capital in the current fiscal year.
The size of the injection depends on the contribution of minority shareholders as well as the surplus generated by the bank's operations, he said.
Meanwhile, all brokerages feel the state bank needs to go in for a rights issue this fiscal itself if it wants to bring in additional capital. However, a rights issue at a lower price will elad to higher dilution.
Here is a quick recap of what brokerage houses are saying about the SBI stock
CLSA: Moody's Downgrade may impact overseas margins in the longer term
••Maintains an underperform rating for the stock
•Target price Of Rs 1930
•Cost Of raising fresh hybrids could be higher
•Cost Of re-financing wholesale debt may rise
•Don't see downgrade to get extended to many other banks
Goldman Sachs: Low Tier I capital & higher non-performing loand continue to be key concerns
•Maintains's a neutral rating on the stock
•12-Month Target Price Of Rs 2,650
•Incremental Slippage Ratio At 3.72%, May Remain High
•Needs To Improve Risk Appraisal & Collection Efforts
•Access to international borrowing impacted by global issues
•May See Its Borrowing Cost Increase
• Don't see impact on ability to raise deposits in domestic market
RBS: NPA Formation: Rising trend may continue
•Buy with target of Rs 2,852
Bank of America Merrill Lynch: Downgrade not to materially impact earnings
•Buy with target Of Rs 2,700
•Capital, asset quality issues largely priced-in
•85 percent of its funding is from domestic sources.
Moreover, the brokerage house believe this downgrade may actually push SBI and the govt to provide more clarity on the timeline for capital raising and expedite the process.
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The 30-share BSE Sensex slumped 400.34 points or 0.77 percent to close at 51,703.83 while the broader NSE Nifty tumbled 104.55 points or 0.68 percent to 15,208.90
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