India’s biggest bank SBI reported its full year financial results last week. Investors were looking at its results very closely to get insight on how bad the situation is within SBI and what to expect from its peers in coming quarters.

If we look at very closely then total income from operations went up by 6% to Rs 272,871.03 crore. Cost of funds stood at 6.59% up by 10 basis points compare to last year of 6.49%. Cost to income ratio stand at 0.86 compare to last year’s 0.79, this is mainly due to increase in its provisions for the bad loans.

Surprisingly, the gross non-performing assets stand at Rs 98,172.80 crore, which represents only 6.5% of the loan book. This changed the market sentiments and we had seen a good rally in its price from there on. It is very hard for us to believe in those numbers, but same time we do not have any factorial evidence to claim those numbers as discrepancy.

The deposits in the bank went up by 6% compare to last year and its loan book also climbed up by 6% reflecting very poor demand for credit. However, management is claiming that loan book will see up tick of approximately 13% -14% for the 2017 financial year. The bank had also identified very risky loans of Rs 31,352 crore and they are monitoring those entities very closely. They are expecting 70% of that amount to slip in bad debts and will have to write down. This puts question mark on its profitability in the future and how bank will be able to grow its earnings with expected slippages of big numbers. I will leave you all hear with your thoughts and your findings. You can share with us by commenting on this article.

Coming to the valuations, that we are very good at, we value this entire business for the 2016 financial year for Rs 70 per share. If we look ahead to the future earnings from the analysts’ expectations, its today’s price is trading at least at 27% premium. There is no need to price this business at its complete book value.

Aziz Dodhiya is the chief investment officer for the Valueoperations funds which operates in the Indian market as an FPI (Foreign Portfolio Investor). We do not offer any personal advice to buy or sell any stocks and the views that are shared by Aziz might not incline to your personal investment strategy and this is the reason we advise you to take professional advice before going ahead with our views.