State Bank of India has reported a drop of 45% in net profit to Rs 2.2 bn for the quarter ended December 2000. However, profit before tax of the bank grew by 16% on the back of higher operating margins and cost efficiencies. Operating margins of the bank during the quarter were higher by 68 basis points due to abolition of interest tax from April 2000.
Operating Profit (EBDIT)
Operating Profit Margin (%)
Profit before Tax
Provisions & Contingencies
Profit after Tax/(Loss)
Net profit margin (%)
No. of Shares (eoy)
Diluted Earnings per share*
P/E (at current price)
Earnings for the quarter declined due to more than 125% jump in provisions and contingencies. During the quarter SBI has provided an amount of Rs 4.6 bn towards the estimated one time issue expenses of India Millennium Deposits, to be redeemed at the end of five years, in the year 2005-06. These expenses are included in provisions and contingencies.
SBI's deposits for the nine months period ended FY01 grew by 13% while advances rose by 22%. Credit to deposit ratio of the bank also increased to 57% (from 53% ) during the same period.
The bank has received more than 27,000 applications for its VRS scheme. However, it has not decided as yet on the manner of absorbing this cost. If it decides to write off the VRS expenses, profits will take a hit in March 2001. Nevertheless, the bank's returns on equity will improve substantially in FY02 and FY03.
During the quarter, SBI has incorporated a subsidiary SBI Life Insurance Company for doing life insurance business, in which it will hold 74% equity. It has also identified Cardif S.A. of France to be the joint venture partner who will hold 26% equity in the company. The returns from its investments would come only after 3-4 years.
At the current market price of Rs 226 SBI is trading at a P/E multiple of 4 times its FY02 earnings and Price/Book value ratio of 0.8 times. Its current valuations are lowest among its peers in the sector. With its focus on reducing the level of NPAs and technology adoption, re-rating in the stock is likely.
LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.
SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.
Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India. Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: email@example.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407