State Bank of India

State Bank of India has come out with the results for the quarter & year ended March 10 and conducted Analyst meet in Kolkata on 14 May 10, to discuss the financial performance and future aspects. O P Bhatt- Chairman of SBI along with his colleagues addressed the Meet.

Highlights of the meet are:

• Deposits of the Bank improved by 8% from Rs 742073 crore in Mar 09 to Rs 804116 crore in Mar 10. Deposits growth was driven by CASA growth of 26.76% and retail Term Deposits growth of 17.64%, despite shedding of high cost bulk deposits by 50.15%. Ratio of high cost bulk deposits to total domestic deposits has come down from 10.74% in Mar 09 to 1.79% in Mar 10.
• CASA ratio has improved from 39.29% as on March 2009 to 46.67% as on March 2010, a growth of 741 bps.
• Market share in total deposits as on Mar 10 was at 16.31% as against 17.70% as on Mar 09, a decline of139 bps on y-o-y basis. The market share in low cost demand deposits stood at 17.51% (17.43% as on Mar 09) is up by 8 bps.
• Gross Advances moved up 17% from Rs 548540 crore in March 09 to Rs 641480 crore in Mar 10. Market share in advances as on Mar 10 stood at 16.28% as against 15.99% as on Mar 09, an increase of 29 bps on y-o-y basis. International advances up by 12.49% from Rs 86301 crore in Mar 09 to Rs 97071 crore in Mar 10 despite hardening of the rupee.
• The bank has proposals worth of more than Rs 20000 crore remains pending for disbursement as on 31 March 2010. The bank witnessed growth in non fund based business by 21%.
• Credit Deposit Ratio is up to 73.56% as at the end of Mar 10 from 66.63% at the end of Mar 09, an increase of 693 bps, bucking the industry trend as the credit deposit ratio for ASCB has come down from 72.32% as on Mar 09 to 72.22% as on Mar 10. Incremental CD ratio during FY10 was 157%.
• Large and Mid Corporate advances have grown from Rs 193311 crore in Mar 09 to Rs 221892 crore in Mar 10 registering a growth of 15%.
• Home loans grew by 32% from a level of Rs 54063 crore in Mar 09 to Rs 71193 crore in Mar 10. Average ticket size of the home loans has increased to Rs 10.01 lakh as against Rs 8.24 lakh in the corresponding previous year. Market share in home loans has increased to 23.8%, there by becoming market leader in home loan segment; as against 19.5% in FY09. The bank has witnessed 70% of incremental growth in lending below PLR of which 18% (Rs 17129 crore) came from housing loans.
• Educational loans has increased by 35% to Rs 8907 crore with average ticket size of Rs 3.76 lakh. The market share in Educational loans has improved by 1 bps to 25% in FY10.
• Loan growth in auto segment has also improved by 45% to Rs 14127 crore with average ticket size of Rs 3 lakh. The market share has improved by 180 bps to 16.8%.
• Agri advances have grown by 17% from Mar 09 to Mar 10. Total disbursements under Agri Advances were Rs 34179 crore during FY 10. Credit extended to 12.32 lakh new farmers during the year.
• Average Cost of Deposits has been brought down by 50 bps to 5.80% as on Mar 10 from 6.30% as on Mar 09. Sequentially, cost of deposits has come down by 12 bps from 5.92% as on Dec 09. Yield on advances (YOA) at 9.66% in FY10 is lower by 49 bps as compared to 10.15% in FY09 driven by an average reduction of 87 bps in PLR during the year and nearly 70% of the growth in advances being sub-PLR during the year. Net Interest Margin (cumulative) improved from 2.56% as on 31st Dec 09 to 2.66% as on 31st March 10; NIM for the quarter has improved to 2.96% in Q4FY10 from 2.82% in Q3FY10 and 2.39 % in Q4FY09.
• As per Basel II the CRAR of the Bank is at 13.39% as at the end of Mar 2010, compared to 14.25% last year, with Tier 1 at 9.45%. As per Basel I the CRAR was 12.00% and Tier I was 8.46% as on Mar 10.
• The bank's strong operating performance was moderated by one off increase in operating cost and higher provision coverage ratio during the quarter, resulting in a drag of Rs 3476 crore. Break up was as follows: (a) Rs 273 crore of drag has resulted on account of excess overhang amounting to Rs 44103 crore in the bank. (b)Rs 923 crore on account of staff expenses and overhead expenses (c) Rs 891 crore drag owing to increase in PCR in spite of fall in over all NPA% on sequential basis. (d) Rs 1389 crore of difference in profit on G Sec as a result of hardening yields.
• Opportunity cost on account of liquidity over hang is estimated at Rs 321 crore in Q4FY10 and Rs 2545 crore in FY10.
• Fee income continued to report strong growth driven by CASA, cross selling, NFB business and loan processing. Fee income was up by 35% to Rs 3486 crore in Q4FY10 and was up by 27% to Rs 9641 crore for FY10.
• Majority of the branches opened since FY07 have been reporting profits. On an average, more than 75% of the branches break even within 18 months.
• Gross NPA has increased by 24% on y-o-y basis and 4% on q-o-q basis to Rs 19534.89 crore for quarter ended March 2010.
• The movement of Gross NPA for year FY10 is as follows: Opening balance Rs 15714 crore, Fresh Slippage Rs 11843 crore, Up gradation and Recovery Rs 6031 crore, Write off Rs 1991 crore. For the Quarter, Movement of Gross NPA is as follows: Opening Balance Rs 18861 crore, Fresh slippage Rs 2504 crore, Up gradation and recovery Rs 1066 crore, Write off Rs 764 crore and Closing NPA Rs 19535 crore.
• The Net NPA has increased by 12% on y-o-y basis and declined marginally by 4% on q-o-q basis to Rs 10870.17 crore. Net NPA has increased by RS 674 crore in Q4FY10. The corporate - Rs 1062 crore, International - write back of Rs 89 crore, SME Rs 107 crore, Agriculture - write back of Rs 74 crore and retail - write back of Rs 332 crore.
• % Gross NPA stood at 3.05% in Q4FY10 as against 2.86% in Q4FY09 and 3.11% in Q3FY10. The % Net NPA declined from 1.88% in Q3FY10 and 1.79% in Q4FY09 to 1.72% in Q4FY10. Provision coverage ratio excluding AUCA stood at 44.36% while including AUCA stood at 59.23% as on quarter and Year ended March 2010.
• The outstanding restructured assets by end of FY10 amounted o Rs 26847 crore. Out of the standard restructured assets of Rs 16796 crore restructured under RBI dispensation, Rs 1616 crore have slipped into NPA category up to Mar 10, taking the slippage ratio for these to 9.62%.
• Return on assets for the quarter has declined to 0.69% in Q4FY10 as against 1.1% in Q4FY09 and 0.94% in Q3FY10. For FY10, ROA has declined to 0.88% from 1.04% a year ago.
• Investment of the bank has increased meagerly by 4% to Rs 285790 crore as on 31 March 2010 as against Rs 275954 crore in previous year.
• Under financial inclusion, the bank plans to cover 50,000 unbanked villages during FY11.

Combined performance of Associate banks:

• Aggregate deposits of Associate banks (Abs) grew by 14% reaching a level of Rs 302835 crore in March10. Growth of CASA deposits was 18% on y-o-y basis. The ratio of CASA deposits to aggregate deposits improved to 30.61% in Mar 10 from 29.73% in Mar 09. Bulk deposits as a percentage of aggregate deposits decreased from 33.77% in Mar 09 to 26.48% in Mar 10.
• On the other hand, Total advances of all ABs grew by 15.12% on y-o-y basis.
• Net profit of ABs grew by 17.74% (YOY) reaching a level of Rs.3266.57 crore, over 22% rise in Net Interest Income.
• Net Interest Margin of ABs improved from 2.60% in Mar 09 to 2.81% in Mar 10. Average Cost of Deposits declined by 82 bps as compared to Mar 09 (6.26% in Mar 10 and 7.08% in Mar 09)
• Capital Adequacy Ratio improved from 12.96% in Mar 09 to 13.66% in Mar 10
• Gross NPA increased to Rs 3997.57 crore in Mar 10 as against Rs 2699.91 crore in Mar 09.
• Gross NPA ratio increased from 1.36% in Mar 09 to1.75% in Mar 10. Net NPA ratio increased from 0.61% in Mar 09 to 0.87% in Mar 10

Outlook:

• The bank has asked RBI for deferment of time period by more than 1 year to accomplish mandated 70% of provision coverage ratio. RBI has suggested all the banks to increase minimum provision coverage ratio to 70% by September 10.
• Targets NIM to be rising at 3% and above in FY11.
• Expects advances to grow by 22-23% in FY11
• Aims Net Profit to cross mile stone of Rs 10,000 crore in FY11.
• The bank is in talks with government for infusion of capital for coming years. Management prefers rights issue without diluting government stake in the bank. However, if the above option is denied, the bank can raise capital by raising equity by decreasing government stake by 4% to 55%