State Bank of India shares crashed 11% over two sessions, hitting a four-month low of ₹975 on Monday after falling as much as 4.5% in early trade. The latest decline follows the announcement of SBI's Q4 FY26 results, with the stock erasing ₹1.11 lakh crore in market capitalisation during the two-day selloff. The market reaction came after SBI's consolidated net profit for Q4 FY26 stood at ₹19,684 crore, registering a 5.6% year-on-year growth, though it declined 6.4% sequentially due to pressure on margins and lower operating profit. The weaker-than-expected performance was attributed to net interest income rising only 4.13% year-on-year but declining 1.35% quarter-on-quarter to ₹44,380 crore, with net interest margins (NIMs) contracting sharply by 18 basis points sequentially to 2.81%, reflecting the impact of repo-linked loan repricing, MCLR resets following rate cuts and a higher share of floating-rate loans. As per The Economic Times, the decline was also impacted by treasury mark-to-market losses and lower non-interest income, with the Reserve Bank of India's curbs on forex arbitrage also weighing on trading income.
Both Nomura and IIFL have downgraded SBI after its Q4 earnings miss, reflecting concerns over earnings growth and weak operating performance. Nomura downgraded SBI to 'neutral' from its earlier rating of 'buy' and trimmed its price target to ₹1,140 from ₹1,205, citing higher sustainable credit costs on transition to new ECL norms that may pose risks to the lender's Return on Assets trajectory. IIFL has also downgraded SBI to 'Add' from its earlier rating of 'Buy' and cut its price target to ₹1,140 from ₹1,230, expecting SBI's Earnings Per Share to grow only at a 7% CAGR over financial year 2026-2028, significantly lower than the 11% to 20% growth projected for private peers. The brokerage anticipates a 13% Compounded Annual Growth Rate for SBI's advances and expects average credit costs of 50 basis points over financial year 2027-2028 from 40 earlier. Nomura noted that SBI currently trades at 1.2 times its financial year 2028 estimated book-value-per-share and does not expect any material re-rating from current levels. However, Motilal Oswal has maintained its 'buy' rating while trimming its target price to ₹1,300 from ₹1,210, citing stable core fundamentals despite NIM challenges. Axis Direct also lowered its target price to ₹1,285 from ₹1,350 while retaining its 'buy' rating.
Despite the market reaction, State Bank of India has declared a ₹17.35 per equity share dividend for its shareholders in the earnings for the fourth quarter ended March 31, 2026. According to the exchange filing, the Central Board of the Bank made this declaration pursuant to Regulation 30 (6) and Regulation 43 (1) of SEBI (LODR) Regulations, 2015. The dividend declaration was made on Friday, May 8, 2026 alongside the bank's Q4 FY26 financial results, providing shareholders with a substantial cash reward despite the stock's decline. The record date for determining eligibility of members entitled to receive dividend on equity shares is May 16, 2026, as announced by SBI, with the dividend payment scheduled for June 4, 2026. As per Mint, the dividend declaration was made on Friday, May 8, 2026, ensuring shareholders have adequate time to meet the eligibility requirements despite the challenging market conditions and operational performance challenges.
Despite margin pressures, SBI's core operating performance showed resilience with core pre-provisioning operating profit (PPoP) rising nearly 20% year-on-year to ₹29,174 crore when excluding treasury volatility. The bank's fee income demonstrated strong growth with loan processing charges jumping 55% year-on-year to ₹3,055 crore, as reported by The Economic Times. Management noted significant uptick in fees from retail as well as corporates and MSMEs. However, treasury trade-offs created mixed results - interest income declined 3% year-on-year as the bank sold higher-yielding securities to offset a mark-to-market loss of ₹4,522 crore on its bond portfolio due to hardening yields. Overall treasury loss was contained at ₹1,471 crore, implying trading gains of ₹3,051 crore, demonstrating the bank's ability to manage market volatility effectively. Motilal Oswal noted that treasury profits were weaker during the quarter amid a spike in bond yields, contributing to the overall margin pressure.
SBI demonstrated improved asset quality metrics during Q4 FY26, with gross NPA ratio declining to 1.49% from 1.82% year-on-year, representing a 33 basis points improvement. The net NPA ratio remained stable at 0.39%, while the Provision Coverage Ratio (PCR) stands at 74.36% with PCR (incl. AUCA) at 91.97%. Fresh slippages increased 31% year-on-year and 24% quarter-on-quarter, but overall asset quality improved with gross NPAs falling 8 basis points sequentially. Credit cost for Q4FY26 stands at 0.27%, indicating better risk management. Loan loss provisions declined by 55.42% YoY to ₹2,872 crore in Q4FY26. Capital adequacy improved sharply to 15.40%, strengthening the bank's growth and risk absorption capacity going forward. Management has guided for 14-16% loan growth in FY27 and aims to sustain domestic NIM above 3% while maintaining credit costs below 50 basis points, irrespective of consequences from the ongoing West Asia war. JM Financial expects SBI to maintain a 1% RoA and an average RoE of 14% over FY26–28E, though it believes these outcomes will be overshadowed by NIM/NII performance in FY27.
SBI's stock has gained 30% over the past year, while HDFC Bank has fallen 19%, with the valuation gap between the two narrowing significantly. SBI now trades at a 16% discount to HDFC Bank based on Bloomberg consensus FY27 estimates, with SBI's price-to-earnings multiple standing at 10.6 compared with HDFC Bank's 12.5, adjusted for the value of listed subsidiaries. The latest two-day selloff has dragged the stock down by a cumulative 11%, eroding nearly ₹1.11 lakh crore in market capitalisation and pulling the lender's valuation below the ₹9 lakh crore mark to ₹8.99 lakh crore. Management remains focused on annual rather than quarterly margin trends, with domestic net interest margin falling 19 basis points sequentially to 2.93% in Q4FY26 due to repo rate cuts and MCLR reductions. If credit costs remain contained and interest rates stabilize or move higher, profitability in FY27 could improve over FY26, supported by strong fee income growth and controlled operating expenses.
