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On Tuesday, JPMorgan analysts adjusted their stance on SBI Sumishin Net Bank Ltd (7163:JP), downgrading the stock from Neutral to Underweight and significantly reducing the price target to ¥3,020 from the previous ¥5,000. The revision follows the financial institution’s fiscal year 2024 results, which prompted a reevaluation of the bank’s earnings forecasts.
JPMorgan’s analysis indicates a more cautious perspective regarding the competitive landscape for deposits, particularly time deposits. This concern has led to a downward revision of net profit estimates for SBI Sumishin Net Bank by 18% for fiscal year 2025 and 39% for fiscal year 2026. The analysts emphasize the challenges the bank faces in attracting ordinary deposits over time deposits, which they believe is necessary for the bank to command a premium valuation compared to traditional banks.
The new price target of ¥3,020 is derived from a price-to-earnings (P/E) ratio of 11 times, based on JPMorgan’s forecasted earnings per share (EPS) of ¥274.9 for fiscal year 2026. This is a marked decrease from the previous EPS estimate of ¥454.3. The P/E ratio remains unchanged at 11 times, indicating a consistent valuation methodology.
JPMorgan’s assessment reflects a cautious outlook for SBI Sumishin Net Bank’s ability to compete effectively in the deposit market. The analysts suggest that until the bank demonstrates a capacity to significantly increase its ordinary deposits, it may struggle to differentiate itself from its peers in the banking sector.
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