The operating margin growth led the 32.7% jump in the net profits of India's largest commercial bank State Bank of India (SBI). The interest income of the bank increased by 17% to Rs 59 bn due to higher volumes in the business.
Operating Profit (EBDIT)
Operating Profit Margin (%)
Payment & provision for employees
Profit before Tax
Provisions & Contingencies
Profit after Tax/(Loss)
Net profit margin (%)
No. of Shares (eoy) (bn)
Diluted number of shares
Diluted Earnings per share*
Advances of the bank grew by 20.8% to Rs 935 bn and deposits increased by 16.5% to Rs 1695 bn. The bank expects the growth rate of 16% in its advances for FY01. However due to 0.75% reduction in the PLR, the average yield on advances declined. As a result interest spread of the bank in the 1QFY01 declined by 20 basis points to 2.7% compared to FY00. The bank will not be affected by 1% interest rate hike announced by RBI in the current year since most of its deposits are in the maturity period over 10 years.
During the quarter the bank has made higher provision for NPAs as per RBI norms. The provision for investment depreciation increased from Rs 36 m in 1QFY00 to Rs 730 m in the current quarter due to rise in the interest rates. But the bank has not marked to market its investment portfolio for the appreciation in the investment value.
At the current market price of Rs 197, SBI is trading at a PER of 6 times its 1QFY01 annualised earnings. The bank's Price/Book value ratio of 0.9 times is among the lowest in the banking sector. The reason for its subdued valuations are its high level of NPAs and technology adoption gap. Once the bank improves on this front re-rating is on the card.
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: firstname.lastname@example.org. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407