SBI tanks, brokerage raises asset quality issue

‘Stressed borrowers, a concern’

Shares of State Bank of India (SBI) fell over 7% on Wednesday even as a brokerage pointed out that concerns around its asset quality remained elevated.

Morgan Stanley estimated SBI’s credit costs at 180 bps (basis points) for FY20 and 125 bps for FY21 compared with 270 bps in FY19.

“This would represent a sharp improvement, but our confidence in these estimates is not very strong,” Morgan Stanley said in a report.

‘Credit crunch’

“There is a credit crunch among weaker-rated borrowers as flow of credit from challenged lenders has stalled,” it added, pointing out it does not see signs of this reversing yet, implying risk of continued defaults.

SBI shares ended 7.37% lower at ₹280.15 on the BSE.

“Given SBI’s size, it is one of the largest lenders to many of these stressed borrowers. The other risk would be if SBI were asked to help any of the challenged lenders should they face distress,” the report added.