bank share State Bank of India

State Bank of India (updated - 13 Aug 2010)
A sliding stock market was resurrected on Thursday by the surging State Bank of India stock, which touched a new high after surprising analysts with stellar results. The optimism in the market stems from the broad-based performance. The net interest income grew 45 per cent over the corresponding period of the previous financial year and around nine per cent over the March quarter.

The June quarter usually witnesses sluggishness in credit offtake and earnings. The net interest margin (NIM) has been growing on asustained basis every quarter and is at 3.18 per cent at present. The question now is whether this performance would be sustainable. If one goes by the banks management, the net interest income growth of 45 per cent might not be.

However, it would remain high at 30-40 per cent. For abank of SBI’s size, this in itself would be an achievement, according to analysts. The NIMs are expected to sustain as the bank would see a growth in advances that would be better than the industrys standards. But highcost deposits have been cut down and the June quarter witnessed an 11-per cent reduction in interest expense, even as interest on advances increased 8.62 per cent.

This is an area that will be closely watched as rates have started hardening and SBI is still to announce a hike. The strong movement in current account and savings account (Casa) – a source of low cost of funds –has risen dramatically to 47 per cent — a 906-basispoint growth over the previous year. This means almost half of the bank’s funds are low cost.

This would be the critical advantage, reckon analysts. Operationally, too, the bank has managed to rationalise employee costs and the overall cost-to-income ratio has declined substantially by 1,305 basis points to 44.20 per cent, as of June. The concern, therefore, would be about the asset quality as nonperforming assets have risen. The unfolding of the interest rate scenario would also have abearing.

On the valuations front, SBI is expected to enjoy a premium of 20-30 per cent over that of its peers. The upside in the share price, however, is not expected to be very handsome.
source - business standard

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Despite higher top-line growth, operating profit grew just 31.5 per cent to `6,357 crore, as other income (including treasury gains and forex gains) rose 13.6 per cent to `4,005 crore. Net profit was less due to provisioning for loans, which almost doubled due to higher gross non-performing loans and raising of the loan-loss provisioning ratio to meet the Reserve Bank of India’s 70 per cent norm by September 2011.

While analysts are bullish on SBI’s core business due to a busy business season ahead in the second half of the current financial year, they expect higher loan-loss provisioning to continue in 2010-11, leading to subdued profitability.

The stock ended 4.4 per cent lower at `3,271.9 on Tuesday, reflecting investor concerns about asset quality. But, even at these levels and 2.3 times 2011-12 estimated book value, it is not cheap and has limited upside potential, reckon analysts.
source - business standard

State Bank of India (updated - 10 Nov 2010)
State Bank of India reported a 22.5 per cent drop in consolidated net profit for the September quarter to `2,363.95 crore on the back of loan-loss provisioning of `2,162 crore. Robust net interest margin and strong traction in the core fee income were key positives, but deterioration in asset quality took atoll on the financials.

However, results are not comparable with the yearago period due to the merger of State Bank of Indore.

Net interest income rose 45 per cent year-on-year (yo-y) to `8,115 crore due to a four per cent decline in interest expenses. The current and savings account ratio jumped 700 basis points despite subdued deposit growth of 11 per cent and increase in deposit rates. In addition to lower interest costs, a 50-basis-point rise in the prime lending rate in August buoyed the net interest margin by 90 basis points year-on-year to 3.4 per cent – the highest in five years.