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State Bank Of India: Coming Together

SBI gained hugely from the merger of its associate banks even as it focussed on retail

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Think size in the financial services mart, and the name that hits you is the State Bank of India (SBI). The merger of five of its associates with itself as also the Bharatiya Mahila Bank catapulted SBI into the league of the ‘top 50 global banks’, and to the pole-position in the BW 500 sub-section on financial services firms for the fiscal 2017.

On a consolidated basis, the SBI group saw its total assets rise 12.09 per cent to Rs 34,45,121.56 crore, and total income by 9.21 per cent to Rs 2,98,640.45 crore. But its consolidated net profit fell 98 per cent to Rs 241.23 crore due to a sharp increase in bad-loan provisioning. Gross non-performing assets (NPAs) went up to 9.04 per cent from 6.40 per cent and net NPAs rose to 5.15 per cent (from 3.73 per cent). On a standalone basis though, its net profit went up by 5.36 per cent to Rs 10,484 crore.

In what was a first-of- its-kind and a harbinger of things to come in the state-run banks’ space in the years ahead, SBI put on weight with the merger of five associate banks — State Bank of Bikaner & Jaipur, State Bank of Mysore, State Bank of Travancore, State Bank of Hyderabad and the State Bank of Patiala. It is widely believed this process will lead to significant long-term benefits for the SBI group.

“Through this merger, we have significantly extended our reach, and network and will benefit from common treasury pooling. SBI now finds itself amongst the world’s largest banks, with a treasury pool of Rs 9,01,642 crore, 24,017 branches and 59,263 ATMs. The merger allows us to leverage operational synergies, enabling the bank to reach out to new clients, and improving our market share,” said SBI chairperson Arundhati Bhattacharya in the bank’s annual report for 2016-17. The bank is now helmed by Rajnish Kumar who took over in October this year as its 25th chairman.

At end-March 2017, the bank had a customer base of 42.04 crore customers, with a market share of 23.07 per cent, and 21.16 per cent in deposits and advances (18.05 per cent and 17.02 per cent before the merger).

On the asset side, the bank played it smart in a market with poor appetite for credit. Loans to large and mid-sized corporates were impacted by the overall slowdown in corporate capex; lack-lustre demand from highly-leveraged corporates — all this even after a substantial fall in lending rates. The bank also snipped its exposure to telecom where advances declined by 12.23 per cent, roads and ports segment by 15.58 per cent, engineering by 25 per cent, textiles by 15.72 per cent; and iron and steel by 1.92 per cent compared to a year ago.

“At SBI, new loan focus has been on highly-rated corporates with strong credentials. SBI is cognisant of the challenges faced by corporates and expects a turnaround in the asset quality to be gradual. In the meantime, our focus remains on strengthening our performance while maintaining the quality of our assets,” pointed out Bhattacharya.

The retail segment continued to drive credit growth for the bank. Home-loans made up for 58 per cent of retail loans, and grew by 17 per cent to a significant market share of 25.88 per cent of outstanding credit to this segment. So did auto loans that grew 21 per cent for a market share of 27.16 per cent.

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