Up 43% in the last one year, Goldman Sachs downgrades this PSU Bank amid multiple headwinds

SBI share price, SBI target price:The country's leading state-run lender after delivering over 43 per cent gains in the last one year has been double downgraded by Goldman Sachs to 'sell' from the earlier 'neutral' call. The target on the stock has also been slashed from Rs 742 to Rs 841. This implies a potential downside of over 9 per cent from the last close.

The stock in Friday's session upon the downgraded at day's low hit levels of Rs 802.8, a drag of up to 2 per cent.

In the previous session, the stock ended lower by a margin at Rs 819.75 per share.

The brokerage said that it foresees multiple headwinds ahead as ROAs or return on assets peak. Also, it is of the view that the risk-reward is also turning unfavourable.  The brokerage held that the profitability at the PSB has peaked with growth remaining under pressure.

Expect ROAs to moderate from peak levels of 1% in FY24 to sub-1% in FY26E, it added. Furthermore, the brokerage pointed out that while the best of credit costs period is behind us, asset quality headwinds are building up.

SBI Q1FY25 results

The company's Q1 profit was at Rs 17,035 crore, witnessing a growth of 0.89 per cent year-on-year.  The operating profit during the period grew by 4.55 per cent YoY to Rs 26,449 crores. The bank’s ROA and ROE for Q1FY25 stood at 1.10 per cent and 20.98 per cent, respectively.