SBI shares fall as lender tempers loan growth target amid tariff uncertainty | Mint

Mumbai: Shares of State Bank of India fell on Monday after the country’s largest lender cut its loan growth target for 2025-26 amid geopolitical uncertainty triggered by the US tariffs, although some brokerages remain optimistic about the bank’s prospects.

SBI reported a 10% fall in its fourth-quarter standalone net profit on Saturday and pared its credit growth projection for this financial year to 12-13% from 14-16% citing the likely impact of the US tariffs on India’s economy.

SBI shares fell by around 2% during morning trade on Monday but later pared some of the losses during afternoon to trade 1% lower at ₹790.90 on NSE. The benchmark Nifty 50 index was up 0.56%.

“SBI expects credit growth of 12-13% in FY26, while margins could contract in view of the recent sharp rate cuts albeit gradually, given the higher share of MCLR loans,” Emaky Global Financial said in a note. However, it added that SBI’s stable asset quality combined with its treasury gains would help keep the lender’s return on assets at around 1.1% in FY26, the same level as in the fourth quarter of FY25.

Indian banks use MCLR, or the marginal cost of funds based lending rate, as a benchmark to determine the lending rates for various loans.

Emaky Global maintained a ‘buy’ recommendation on SBI shares but cut in its share price target for the bank to ₹975 from ₹1,025, factoring in a 4-5% decline in the bank’s earnings during FY26 and FY27. 

Price targets by other analysts were in the range of ₹840 to ₹1,050.

Nuvama Research said that while SBI expects its margins to be under pressure, the impact would be relatively lower given the bank’s lower share of repo-linked loans at 29%. 

“Factoring in another 50 (basis point) rate cut and with certain levers on the cost front, the bank expects to maintain NIM (net interest margin) around 3% levels on full-year basis with some quarterly variations,” Nuvama said in a note.

SBI’s loan growth of 12.5% on-year in the fourth quarter was marginally better than the system loan growth of 11%. Its deposit growth at 9.5% was marginally below the system deposit growth of 10%. The bank also reported a 3% year-on-year growth in net interest income to ₹42,775 crore, while net interest margin (NIM) for the quarter was 3%.

“While the weak net interest income growth was offset by a strong net operating income (NOI) (40% YoY), the normalization of credit costs and high opex (operating expenditure) growth (+18% YoY) ensured that the EPS (earnings per share) declined by 10% YoY, with PPoP (pre-provisioning operating profit) growth also weak at 9% YoY,” Bernstein Research said in a post-earnings note.

The global brokerage has a target of ₹900 on SBI’s stock, estimating a FY26 book value of ₹608 and a P/B (price per book) multiple of 1.5 times. 

The US impact

During the lender’s post-earnings conference call on Saturday, SBI chairman C.S. Setty attributed the lower loan growth target to uncertainty surrounding US-led tariff actions. “Our earlier guidance was 14-16%, we’re moderating that to 12-13%. At a system level, credit growth would probably be 10-11%,” Setty said.

While he expects the overall tariff impact on the Indian economy to be minimal given that it is a “domestic consumption-driven economy” and exports to the US are limited, Setty said the uncertainty surrounding the tariff actions will “impact the overall economic and investment scenarios”. 

“From that background, we believe that there would be some moderation in the credit growth (in FY26),” he added.

SBI’s loan growth outperformance as compared with the system loan growth declined to 1.5 percentage points in the fourth quarter from 3 percentage points in the preceding three months. This was in part due to pre-payments in SBI’s corporate book and moderation in loan growth in the small and medium enterprise segment, analysts said.

SBI’s deposit growth continued to be led by term deposits whereas current account and savings account (CASA) deposit growth was slower at 6.3%, they added.

While corporate loan growth in the fourth quarter was slower due to deleveraging by state-owned entities, SBI’s retail loan portfolio was hit by significantly lower growth in personal loans, which the bank attributed to slower demand.

SBI expects growth to revive in this segment as salaried employees benefit from the tax rate cuts offered in the Union Budget. 

SBI’s corporate loan pipeline stands at ₹3.4 trillion, Setty said, adding that he doesn’t anticipate any change in corporate investment strategies owing to the US tariffs. The bank’s corporate loan book grew 9% year-on-year in the fourth quarter, and its retail loan book grew 11.4%.