State Bank of India (SBI) recorded a strong 30% growth in bottomline during the second quarter ended September 2002, aided by strong improvement in operating margins. The bank's interest income however, witnessed a single digit growth of 6% during the September quarter (same as in June quarter). Slowdown in industrial activity has impacted the bank's corporate loan disbursements.
Income from operations
Net interest income
Operating Profit Margin (%)
Provisions and contingencies
Profit before Tax
Profit after Tax/(Loss)
Net profit margin (%)
No. of Shares (m)
Diluted Earnings per share*
Interest income from advances saw a recovery in growth (3.7%). Though the growth rate was small, performance was better than in June quarter, where it saw over 1% dip in interest on advances. On the other hand, income from investments growth slowed down in 2QFY03 to around 4% YoY, as compared to a 9% growth during the June quarter. This is because the incremental investments would have been at a significantly lower yield. The bank's aggressive foray into retail financing market could help in saving the topline growth in the coming quarters. The bank is facing stiff competitive pressure on its forex and cash management services business.
Interest on advances
Income on investments
Interest on bal with RBI
During the quarter, the bank's operating margins improved with lower cost of funds and savings on employee cost. An 11% growth in net interest income and a reduction in cost to income ratio to 51.2% (from 55% in 2QFY02) suggest strength in the bank's financial performance. Lower non-performing loan provisioning further contributed in fueling the bottomline growth.
Please note that we have compared this year's performance with last year's stated numbers. SBI seems to have restated some last year numbers and as such is reporting a 34% growth in 2QFY03 bottomline. We haven't received the company's press release as yet. Therefore, we have reported the performance based on the data available with us.
At the current market price of Rs 231, SBI is trading at a P/E of 3.8x 1HFY03 annualised earnings and adjusted price to book value ratio of 1.4x. Due to the cut in bank rate and CRR in the interim monetary policy, SBI too has cut its deposit rates for customers. This may increase its spreads atleast in the short term. But concerns of growth in the bank's loan portfolio could curtail the bank's earnings growth going forward, despite a strong improvement in operating margins.
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