Bearish Overhang Curbs Sbi Despite Good Results

The generally weak sentiment impacted the State Bank of India scrip despite excellent results from the nation's premier bank. On the Bombay Stock Exchange, the scrip witnessed volatility ending at Rs 201 on Friday last, a gain of Rs 5.80 over the previous week's close of Rs 196.80. On the National Stock Exchange, the scrip gained by Rs 6.25 over the previous week's closing levels of Rs 197.05 to end at Rs 203.30 on Friday last.

But for Moody's downgrade and the imposition of sanctions, marketmen were expecting the bank's results to bring about a change in sentiment.

Foreign funds were reported to have been aggressive sellers at the State Bank of India counter on the last two days week, pushing the scrip price southwards.

The bank clocked a net profit of Rs 1861.26 crore for the full year 1998, a spurt of 38 per cent over the previous year's figures of Rs 1349.25 crore.

According to analysts tracking the sector, the growth for the full year has been aided not only on account of lower provisioning made but also due to the growth at the operating level.

The increase in net profits has been on account of a recovery in other income and by keeping a strong check on operating expenditure, which grew by just 2.5 per cent. Also, marketmen are impressed by the growth in gross profits despite the falling interest rates scenario.

Says Hrikesh Anjaria, analyst at Khandwala Finances: "On the balance sheet front, we expected deposits to grow at a healthy 17 per cent and credit offtake by 11 per cent as against the initial growth target of 16 per cent and a revised target of 12 per cent for financial year 1998.

Net non-performing assets (NPAs) for financial year 1998 are expected to come down to less than 7 per cent from 7.3 per cent earlier on the back of strong recoveries."

"For the current year, we expect the bank to record a deposit growth of 16 per cent.

Entry into new growth areas like infrastructure, housing finance, consumer finance, credit cards and an expected recovery in the economy from second half of financial year 1999 should drive credit growth to 15 per cent for the forthcoming fiscal. This, coupled with an improvement in spreads should drive credit growth to 15 per cent for the coming fiscal."

On the flip side analysts are concerned about the bank's active intervention in the foreign exchange market over the last month as they feel it could possibly have an adverse impact on the bottomline.