Saturday, July 29, 2017

Banker To Every Indian, Indeed

Arundhati Bhattacharya, the bank’s self-effacing chairperson is the ‘Woman Business Leader of the Year’ in BW Businessworld’s edition of the ‘Most Respected Companies 2017

Few banks play such a pivotal role in a country’s economy as the State Bank of India (SBI); it’s truly a ‘Big Daddy’. At end-March, the bank’s share of systemic deposits and advances stood at 23.07 per cent and 21.16 per cent, respectively (after the merger of SBI with its associate banks and the Bharatiya Mahila Bank in the previous fiscal). And if you were to also pencil-in the share of state-run banks in this business at around 70 per cent, it makes SBI (though governed under a separate Act) very much the ‘polestar’.

No doubt that SBI has shown the way admirably. And for the same Arundhati Bhattacharya, the bank’s self-effacing chairperson is the ‘Woman Business Leader of the Year’ in BW Businessworld’s edition of the ‘Most Respected Companies 2017’. She was also conferred the ‘Lifetime Achievement Award in Banking’ in BW’s ‘Best Banks’ Survey 2017’ earlier this year. It tells you Bhattacharya is a standout both in her peer group and India Inc.

Numbers Say a Lot

A good part of SBI is legacy brings out its set of woes; the bank also helms a lot many programmes on behalf of the Centre. And, in turn, all of this — at many levels — tends to handicap the bank. What is the dread in the system as on date? Dud-loans and capital constraints. The bank’s performance shows it has tackled the plot admirably.

At end-March, operating profit grew by 17.55 per cent to Rs 50,847.90 crore; the net-profit by 5.26 per cent to Rs 10,484.10 crore after the higher provisioning requirements. The asset quality review (AQR) undertaken by Mint Road saw non-performing assets (NPAs) increase to Rs 1,12,343 crore (Rs 98,173 crore). Gross NPAs stood at 6.90 per cent (6.50 per cent), but the net-NPA ratio fell by 10 basis points (bps) to 3.71 per cent. Provisioning coverage was up 526 bps to 65.95 per cent.

You can’t also overlook the fact that capital quotes increased at a premium even as dud-loan pressure continues to hold sway. Yet it is to the credit of Bhattacharya that gross advances grew over the Rs 16,00,000-crore mark — at 7.80 per cent to Rs 16,27,273 crore. To contextualise this growth, Bhattacharya points out in the bank’s annual report for 2016-17: “The interesting part is as per the limited information available in public domain, China had injected $127 billion into their banking system during 2004-07, while the Fed (US Federal Reserve) injected $2.27 trillion following the 2008 crisis. In contrast, during the period 2006-2017, the cumulative capital infusion into state-run banks was at $17 billion.”

The other feather in the cap is the merger of SBI with its associate banks, which is the first large-scale consolidation in the Indian banking industry — State Bank of Bikaner and Jaipur, State Bank of Mysore, State Bank of Travancore, State Bank of Hyderabad, and State Bank of Patiala. The merger was particularly taxing given the state-run nature of the SBI Group— union’s sensitivities had to be handled with great care. That said, it will give SBI the much-needed heft in the face of the competition, which will arise in the near future.

With this merger, SBI has entered into the league of top 50 global banks (up from 55th position in 2016, Source: The Banker, July 2016) with a balance sheet size of Rs 33 lakh crore, with 24,017 branches and 59,263 ATMs servicing over 42 crore. The bigger balance-sheet size will enable the bank to command better terms in both international and domestic markets.

It has been a truly command performance by Bhattacharya. 

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