State Bank of India Results FY 08 - by Narasimhan
State Bank has recently announced its FY 08 performance. Net Interest income for the year went up by 13.04% to Rs. 170.21 the net profit has gone up to Rs. 67.29 Billion registering a growth of 48% over the previous year. The net interest margin at 3.41% has remained flat at the previous year figure. Other income including Fee income (Rs. 59.14 billion at 23% growth rate) registered a growth of 28.52% over the previous year, going up to Rs. 86.94 Billion. The demand deposits are now 44% of the total resources, an improvement of 1% over the previous year. Despite rising share of demand deposits the bank incurred a rise in the average interest cost.
The deposits have increased by 23.4% and are at Rs. 4.36 Trillion. The advances are up by 23.4% growing to Rs. 3.42 trillion. There has been good growth in the housing, SME and auto loans by 20%, 26% and 30% respectively. The bank added 11% growth in the network. There has been a dip in the credit deposit ratio by 2.09% which now stands at 72.44%. While the bank marginally increased its share in deposits the market share of advances has remained flat.
Mutual fund and Insurance businesses of the subsidiaries have pocked up well. SBI Mutual is placed on top for the growth it has returned to the unit holders. The bank was able to hold cost and the cost to income ratio declined by 5.20% to yield additional Rs. 31.07 Billion at the operating profit level. The non performing assets are 1.78% of the total assets up from 1.56% in FY 07. The high interest spreads and the competitive domestic market seems to have made the bank’s task difficult to hold the asset quality. The return of owned funds is 17.82% as compared to 14.24% in FY 07. The capital adequacy is at a comfortable 13.47% compared to 12.34% in the previous year. Among the associate banks State Bank of Mysore has registered the highest profit growth at 27.94%.
What the investors can do?
The bank is showing a good performance is continually posting good results
Investors may hold this share as the good results will rekindle investor interest in this stock.
The stock prices show a short term peaking and near term investors can take a buy position. The long term buyers can wait till the market settles down to a lower level near Rs. 1600 per share as the growth is unlikely to be linear and therefore will give ample opportunity to enter during the year.