The Telegraph
Since 1st March, 1999
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Company Report


State Bank of India (SBI) reported a moderate rise of 8 per cent in its total income for fiscal 2003 at Rs 36,827.28 crore (Rs 33,984.57 crore) against which its total spending was up 7 per cent at Rs 33,722.28 crore Rs 31,552.95 crore) leading to a 31 per cent rise in net profit.

SBIís performance for the year was mainly driven by stable spreads, a higher non-interest income and a control on the operating expenses, which enabled it to maintain its profitability trend despite a fall in lending rates. At Rs 31,087.02 crore (Rs 29,810.09 crore) the total interest income was up 4 per cent from the previous year when it had reported a growth of 14 per cent.

SBIís income from core banking operations (interest/discount on advances/bills) was up 1 per cent over the corresponding previous period at Rs 11,229.10 crore (Rs 11,063.41 crore), while its investment income was up 7 per cent over the year-ago period at Rs 15,257.64 crore (Rs 14,271.87 crore).

The overall interest expended was up 2 per cent over last year at Rs 21,109.46 crore (Rs 20,728.84 crore). Cost of deposits fell from7.1 per cent to 6.4 per cent. The lower interest rates prevailing throughout the year have helped SBIís performance. Lower deposit rates and high lending rates improved spreads by 10 per cent over last year to Rs 9,977.56 crore (Rs 9,081.25 crore). The spread as percentage too went up from 30 per cent during last year to 32 per cent in the current year.

Margin improved with operating profit up by 29 per cent over the same period previous year to Rs 7,775.40 crore (Rs 6,044.83 crore), while the OPM shot up to 25 per cent from 20 per cent during the corresponding previous period.

Higher provisioning has restricted the profit growth. Other provisions and contingencies at Rs 2,507.89 crore (Rs 2,010.19 crore) went up by 25 per cent over the previous year, while provision for taxes was up 35 per cent from the same period in the previous year to Rs 2,162.51 crore (Rs 1,603.02 crore). Despite such a high provisions net profit was up 28 per cent over the previous year at Rs 3,105 crore (Rs 2,431.62 crore).

The stock currently trading at Rs 372 discounts its full year earnings per share of Rs 59 by just about six times. Unless interest rates start to rise, the stock will keep rising on earnings growth from its obscenely large spreads.

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