State Bank of India edged up 1.1% to Rs 373.25 today, showing strength, in tandem with a few other heavyweights, in a generally buoyant market.

The scrip hit the Rs 375.20-mark in afternoon trades, a lifetime high for the stock. Volumes on the counter were decent, at 14.9 lakh shares by 13:58 IST.

On Wednesday, the stock surged 2.7% to Rs 368.85 on heavy volumes of 34.5 lakh shares on BSE. The stock has seen a bout of volatility of late, which followed a sustained rise from the Rs 230-levels in October 2003. After scaling to a high of Rs 365.90 on 6 June 2003, the stock slipped to Rs 346.50 on 13 June 2003. It has once again bounced back to the current Rs 373-level. From a low of Rs 229.75 on 31 October 2002, the stock has gained 62.3% to the current Rs 373.

The stock's revelry, in fact, began with the passage of the Securisation Act in November 2002. The Act paves the way for recovery of sticky loans without recourse to law.

"The market in the meantime has been intermittently bombarded with rumours that the FII ceiling in the stock would be relaxed," a dealer with a local brokerage says. The FII holding in the bank is capped at 20%. As on 31 March 2003, FIIs held a near 20% stake in the stock. SBI is reported to have asked the government to remove the about 8% GDR holding from the overall FII ceiling of 20%. Relaxation of FII holding is seen as a key trigger for the stock.

SBI has reported improved operating results for FY 2002-03. The operating profit of the bank stood at Rs 7,775.40 crore compared to Rs 6,044.83 crore in 2001-02, recording a growth of 28.63%. The bank posted a net profit of Rs 3,105 crore for 2002-03 compared to Rs 2,431.62 crore in 2001-02, registering a growth of 27.69%.

The growth in profit in 2002-03 has been achieved through increases, both in net interest income and fee income. Profit on sale of investments in 2002-03 was Rs 1,694.60 crore as against Rs 341.85 crore in 2001-02, and thus the increase under this head contributed to the growth in profit.

The bank witnessed improvement in key ratios. The return of average assets moved up to 0.86% from 0.73%. The return of equity improved to 18% from 15.9%. The net NPAs went down to 4.5% from 5.6%. Net interest income was Rs 9,977.56 crore as against Rs 9,081.25 crore in the previous year, a growth of 9.87%. This was due to growth in both interest income on resources deployed in treasury operations as well as on advances. Cost of deposits (excluding Resurgent India Bonds/ India Millennium Deposits) witnessed a reduction from 7.07% in 2001-02 to 6.43% in 2002-03. Net interest margin was higher at 2.95% compared to 2.91% in the previous year.

For the current year 2003-04, the bank is targeting a deposit and advances growth of 18% and 16% respectively. The bank also wishes to bring down the net NPA ratio to below 2% by 2005. There are no plans to introduce the second round of VRS, as about 35,000 employees will be retiring in the next two years and the bank plans to effectively develop staff into other areas for generating higher fee-based income.