Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
VRS hits SBI's FY01 profits - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Jun 21, 2001

    VRS hits SBI's FY01 profits

    SBI has taken a hit in its profits by charging VRS expenses to the tune of Rs 8.8 bn in FY01. The bank's profits excluding VRS however jumped by 22%, in line with our expectations.

    (Rs m) FY00 FY01 Change 4QFY00 4QFY01 Change
    Interest Income 222,009 260,034 17.1% 60,758 74,446 22.5%
    Other Income 35,693 40,178 12.6% 11,322 14,782 30.6%
    Interest Expenditure 152,726 177,556 16.3% 38,184 50,390 32.0%
    Operating Profit (EBDIT) 69,284 82,478 19.0% 22,574 24,056 6.6%
    Operating Profit Margin (%) 31.2% 31.7%   37.2% 32.3%  
    Other Expenditure 62,952 74,156 17.8% 19,008 24,319 27.9%
    Profit before Tax 42,025 48,500 15.4% 14,888 14,518 -2.5%
    Provisions & Contingencies 11,725 13,912 18.7% 718 -1,588  
    Tax 9,785 9,714 -0.7% 4,684 4,107 -12.3%
    Profit after Tax/(Loss) 20,516 24,874 21.2% 9,486 12,000 26.5%
    Provision for VRS - 8,832 -   8,832 -
    Net Profit 20,516 16,043 -21.8% 9,486 3,168 -66.6%
    Net profit margin (%) 9.2% 9.6%   15.6% 16.1%  
    No. of Shares (eoy) 526 526   526 526  
    Diluted Earnings per share* 39.0 30.5   72.1 24.1  
    P/E (at current price)   7.5     9.5  

    SBI's topline grew by an impressive 23% in the fourth quarter of the year. However margins were depressed and operating expenses increased sharply. A 480 basis points drop in operating margins in 4QFY01 could be attributed to the inability of the bank to sustain yield on advances after a cut in deposit rates.

    The cost to income ratio of the bank was also higher at 63% in 4QFY01 (56% in 4QFY00). But if we were to exclude an amount of Rs 4.4 bn written off towards the one-time issue expenses of India Millennium Deposits (to be redeemed at the end of five years, in 2005-06), the ratio declined to 57% in FY01 from 60% in FY00.

    During the year SBI implemented a VRS plan to cut its operating costs and improve efficiency levels. The total cost of the scheme to the bank was Rs 23 bn. In FY01 the bank has made a provision of Rs 8.8 bn and plans to write off the balance expenditure equally over a period of four years.

    SBI is moving towards the right direction by implementing the VRS, foraying into retail, technology upgradation plan and entering into the insurance business. In future it will be however difficult for the bank to operate at high margins considering the increasing competition and improving quality of services provided by other banks. Also, the bank will have to provide a higher amount as provisions for non performing assets, if the economic and industrial activity witnesses further downtrend.

    At the current market price of Rs 228 SBI is trading at a P/E of 8x and Price/Book value ratio of 0.9x FY01 earnings.



    Equitymaster requests your view! Post a comment on "VRS hits SBI's FY01 profits". Click here!


    More Views on News

    SBI: Asset Quality and Slow Credit Remain Achilles' Heel (Quarterly Results Update - Detailed)

    Aug 22, 2017

    State Bank of India (SBI) continues to battle sliding asset quality and sluggish credit growth.

    Insider at It Again. This Time Stealing from Buffett and Berkshire (The 5 Minute Wrapup)

    Aug 12, 2017

    What is Equitymaster Insider Ankit Shah stealing from Berkshire's success?

    The Pied Pipers of 'Buy High, Sell Higher' (The 5 Minute Wrapup)

    Jul 14, 2017

    What should you make of Ola drivers turning day traders and Radio Jockeys giving opinion on the Sensex?

    IDFC Bank: Strong Trading Income Shields Credit Slowdown (Quarterly Results Update - Detailed)

    Aug 10, 2017

    IDFC Bank is taking steps to address contracting NIMs and successfully transition in to a retail bank.

    ICICI Bank: Loan Slippages Trending Downwards (Quarterly Results Update - Detailed)

    Aug 10, 2017

    Asset quality will be the key thing to watch out for going forward.

    More Views on News

    Most Popular

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    The Most Important Innovation in Finance Since Gold Coins(Vivek Kaul's Diary)

    Aug 10, 2017

    Bill connects the dots...between money and growth, real money and real resources, gold and cryptocurrencies...and between gold, cryptocurrencies, and time.

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    Bitcoin Continues Stellar Rise(Chart Of The Day)

    Aug 10, 2017

    Bitcoin hits an all-time high, is there more upside left?

    5 Steps To Become Financially Independent(Outside View)

    Aug 16, 2017

    Ensure your financial Independence, and pledge to start the journey towards financial freedom today!

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    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: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms


    Aug 22, 2017 (Close)



    Compare Company With Charts