SBI: VRS benefits - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

SBI: VRS benefits

Jul 25, 2001

State Bank of India posted impressive first quarter performance with 21% jump in interest income and 26% rise in earnings. The bank's profits growth was however, trimmed by over 100% increase in tax provision.

(Rs m)1QFY011QFY02Change
Interest Income 59,231 71,414 20.6%
Other Income 8,041 9,905 23.2%
Interest Expenditure 40,504 49,956 23.3%
Operating Profit (EBDIT) 18,727 21,458 14.6%
Operating Profit Margin (%)31.6%30.0% 
Other Expenditure 15,900 15,846 -0.3%
Profit before Tax10,86815,51642.8%
Provisions & Contingencies 4,239 4,6279.2%
Tax 2,012 4,205109.0%
Profit after Tax/(Loss) 4,617 6,684 44.8%
Provision for VRS  886 -
Net Profit 4,617 5,798 25.6%
Net profit margin (%)7.8%8.1% 
No. of Shares (eoy) 526 526  
Diluted Earnings per share*35.144.1 
P/E (at current price) 4.8 

The bank's operating margins declined by 160 basis points. This could be due to more than proportionate reduction in lending rates with a fall in deposit rates. Increasing competition in the scenario of more liquidity in the markets has resulted in a dip in operating margins.

Successful implementation of the VRS plan has however, helped the bank in controlling its employee cost. This has reduced the cost to income ratio of the bank to 51% from 59% during 1QFY01. During the quarter under review, the bank provided for Rs 886 m towards VRS cost on a pro-rata basis (Rs 3.5 bn expected for full year). Profits before this provision were higher by 45% in 1QFY02.

During the quarter, the bank's tax provision increased by over 100%. This could be due to higher provision required for deferred taxes in line with the recently introduced accounting standard.

At the current market price of Rs 211 SBI is trading at a P/E of 3.3x and Price/Book value ratio of 0.7x FY02 projected earnings. The bank's capital adequacy ratio of 13.3% is above the minimum required and is likely supplement its rapid expansion plans. Also, SBI is initiating measures to reduce its NPA ratio by increasing the coverage ratio (57% as on FY01). These factors along with its thrust on retail and IT upgradation are expected to double its earnings growth in the current year.

Equitymaster requests your view! Post a comment on "SBI: VRS benefits". Click here!


More Views on News

SBI Announces Quarterly Results (3QFY21); Net Profit Down 6.9% (Quarterly Result Update)

Feb 5, 2021 | Updated on Feb 5, 2021

For the quarter ended December 2020, SBI has posted a net profit of Rs 52 bn (down 6.9% YoY). Sales on the other hand came in at Rs 667 bn (down 1.4% YoY). Read on for a complete analysis of SBI's quarterly results.

SBI Announces Quarterly Results (2QFY21); Net Profit Up 51.9% (Quarterly Result Update)

Nov 6, 2020 | Updated on Nov 6, 2020

For the quarter ended September 2020, SBI has posted a net profit of Rs 46 bn (up 51.9% YoY). Sales on the other hand came in at Rs 668 bn (up 3.9% YoY). Read on for a complete analysis of SBI's quarterly results.

How the YES Bank Collapse Unfolded - 10 Points (Sector Info)

Mar 9, 2020

A timeline of how YES Bank went from a stock market darling to a pariah.

Today's Stock Market Crash: 10 Points (Sector Info)

Mar 6, 2020

Top factors that dragged the markets lower today.

More Views on News

Most Popular

India: Recovery Stalled by Vaccine Games? (The Honest Truth)

Apr 13, 2021

Ajit Dayal on how India's vaccine strategy will impact the markets.

4 Stocks to Make Your Portfolio Immune to the Second Covid Wave (Profit Hunter)

Apr 6, 2021

Rather than predicting the market, successful investing is more about preparing well and placing your bets accordingly.

An India Revival Stock I'm Bullish On... (Profit Hunter)

Apr 9, 2021

This could take India to the position of 3rd largest economy.

Why Did the Market Crash on Monday? (Fast Profits Daily)

Apr 13, 2021

In this video, I'll you what I think is the real reason behind yesterday's market crash.

A Unique Sector for Short-Term Profits (Fast Profits Daily)

Apr 12, 2021

This ignored sector could deliver big short-term profits.


India's #1 Trader
Reveals His Secrets

Secret To Increasing Your Trading Profits Today
Get this Special Report,
The Secret to Increasing Your Trading Profits Today, Now!
We will never sell or rent your email id.
Please read our Terms


Apr 16, 2021 (Close)