Bajaj Finance Ltd on Tuesday surpassed state-run lender State Bank of India (SBI) in terms of market capitalisation for the first time, with shares of the former having surged over 50% so far this year. SBI has fallen 13% so far this year.
Bajaj Finance, which was trading at ₹3,992.20 on the BSE, down 1.4% from previous close, has a market cap of ₹2.32 trillion. SBI, which fell 6% to ₹254.55 a share, has a market cap of ₹2.28 trillion.
“With the upcoming festive season and several planned online and offline mega sales events ahead, we reiterate our theme around Bajaj Finance being in the best position to play the India consumption story,” said Emkay Research in a 25 September note.
The brokerage firm has upgraded its earnings per share for fiscal year 2020-21 by 9-10%, factoring in the corporate tax cut. Emkay Research remained ‘overweight’ on the stock with a target price of ₹4,550 a share.
Bajaj Finance has a total loan book of ₹1.25 trillion, whereas SBI’s loan book stood at ₹22.40 trillion.
Gross non-performing asset as percentage of advances of Bajaj Finance stood at 0.6% as of fiscal 2019 against 0.4% a year ago.
On 24 September, Morgan Stanley had downgraded the State Bank of India to ‘equal weight’ from ‘overweight’ amid asset quality and net interest uncertainty. It maintained the target price of the lender’s shares at ₹330. According to Bloomberg data, SBI has 45 buys, four holds and one sell.
“We raise our F21 and F22 EPS estimates ~5% each, as the tax rate cut outweighs lower margins. We downgrade to EW; upside appears limited given uncertainty on asset quality (for SBI and the system) and NIMs. We prefer large private banks where we see better EPS progression and re-rating,” Morgan Stanley report said.
Banking stocks fell sharply over the past few sessions following concerns over financial irregularities and surging bad loans. Fall in credit growth, recent default by Altico Capital, and issues with PMC Bank, Lakshmi Vilas Bank and DHFL dented investor sentiment.