| (Rs crore) | H1FY05 | H1FY06 | % chg |
| Net interest income | 1371.34 | 1540.46 | 12.33 |
| NIM(%) | 3.23 | 3.37 | - |
| Other Income | 754.06 | 518.47 | -31.24 |
| Operating profit | 1146.40 | 951.08 | -17.04 |
| Cost to income ratio (%) | 46.06 | 53.81 | - |
| PAT | 506.30 | 416.15 | -17.81 |
| NPM (%) | 23.82 | 20.21 | - |
| EPS | 17.26 | 14.19 | - |
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| In the past three years, the bank's performance was affected by modest advances growth, falling yields, higher provisioning for depreciation on investments. But the bank has seen decent growth in the past year as net interest margins have improved and non-performing assets went down. |
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| In the first half of FY06, the bank recorded a 30 per cent growth in advances, thanks to the booming economy. Credit to deposit ratio improved to 60 per cent compared to 50 per cent in the same period last fiscal. The bank's net interest margins, thus, increased slightly due to marginal improvement in yields on advances. |
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| Despite this, the bank recorded a 17 per cent decline in operating profit due to higher operating costs (due to branding and other expenses ) and a sharp decline (31 per cent) in treasury income. Net profit declined by 17.8 per cent. |
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Going forwards, the bank has identified agriculture, retail and the SME (small and medium enterprises) as the focus areas and hopes to clock a 30 per cent growth in advances in the coming two years.
| FINANCIALS | | Other parameters (%) | FY05 | H1FY06 | | Capital Adequacy ratio | 12.62 | 12.79 | | Share of CASA | 36.50 | 38.30 | | Credit-Deposit Ratio | 55.82 | 59.94 | | Share of retail credit | 16.96 | 17.26 | | Gross (Net) NPAs | 7.3(1.45) | 6.34(1.13) | | Share of investments in total assets | 39.30 | 37.80 |
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| On the asset side, the bank does not seem risky. About 73 per cent of the bank's net advances are secured by tangible assets. Though it has been able to reduce its NPAs, it is still on the higher side compared to other public sector peers. Net NPAs have fallen from 1.45 per cent last fiscal to 1.13 per cent in Sept 2005. |
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| At Rs 210-230, the stock trades at a price to adjusted book value (P/Adj BV) of 0.77-.85 times and price to earnings mutliple (P/E) of 6.1-6.7 times for FY07E. The valuation is cheaper when compared to its peers like Canara Bank (P/Adj BV of 1.3 times) and Punjab National Bank (P/Adj of 1.3) for FY07E. |
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| According to Rajesh Malhani of Prabhudas Liladhar, the bank is cheapest among the large public sector banks and with the bank's initiatives in building technology and brand, their business is expected to make great strides. He expects a price target of Rs 300 in a year's time. |
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| According to a banking analyst of a leading brokerage firm, the bank has a great future and is still undervalued. However an investor should invest in the bank for long term. |
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