 "Healthy recovery to better Q4 asset quality: SBI")
The State Bank of India (SBI), the country’s largest lender, is set to improve its performance on asset quality, which had declined for three consecutive quarters.
According to Pratip Chaudhuri, chairman, the gross non-performing assets (NPA) are expected to come down to 4.5 per cent of the total in March-end, from 5.3 per cent in end-December.
In absolute terms, the gross NPA figure will be Rs 49,000 crore, down from Rs 53,458 crore as on December-end. Between March and December 2012, SBI’s gross NPA increased from Rs 39,676 crore — 4.44 per cent of gross advances — to Rs 53,458 crore.
A surge in loan growth in the last two months of FY13 has helped SBI clock an impressive growth of 21 per cent in the last financial year, much better than the 16-18 per cent projected by the bank.
Speaking at a media conference, Chaudhuri said, “The big push on loan growth came in end-February. The main driver was demand from the corporate sector. The demand from the retail sector was steady. The demand for project loans was not significant.”
In retail, while home loan growth was about 30 per cent, automobile loans have grown 25 per cent.
Deposit growth for FY13 was close to 15 per cent, despite cutting the bulk deposit portfolio. “At financial year-end, we generally get a lot of government funds. Those funds are parked in SBI and then disbursed. We have ended the year with a deposit growth of 14.88 per cent, despite shedding bulk deposits to one per cent from 4.5 per cent,” he said adding SBI had additional liquidity of Rs 40,000 crore.
Expectation from RBI
While indicating the bank was not in a hurry to cut interest rates, the SBI chairman said the Reserve Bank of India (RBI) should cut the cash reserve ratio (CRR) by 100 bps in the annual monetary policy review scheduled on May 3, “given the recent developments (fall in commodity prices) ... This will help us reduce the base rate by 20 bps,” said Chaudhuri, adding a repo cut alone might not induce an interest rate cut. SBI’s base rate is currently 9.7 per cent.
CRR is the amount of deposits banks need to park with RBI as cash. RBI does not pay interest for CRR balance. The central bank had reduced CRR by 200 bps between January 2012 and January 2013, but has not reduced it in the mid-quarter review held in March. Currently, CRR is four per cent.
On Kingfisher
The SBI chairman reiterated the lenders’ consortium will continue to sell pledged United Spirits (USL) shares and then all other assets to recover dues from the grounded airline. He said, “We have given instructions to recover and to enforce all the securities. Our intention is to sell everything... all means of recovery (will be employed)... nothing would escape. Till such time as we will get back our dues in full, we will press our full recourse on all the securities that we possess.” He added the banks would first sell the shares, followed by other liquid assets, then fixed assets and finally personal assets.
SBI, the leader of the lenders’ consortium, has an exposure of Rs 1,600 crore to Kingfisher Airlines. The total exposure of all banks in the airline is Rs 7,000 crore.
When asked about recent reports of revival of the airline, grounded since October last year, Chaudhuri said the banks have run out of patience. “We are not very keen. I think we have waited long enough. And all other airlines with whom we have a transaction have submitted revival plans and worked on them. In this case, there are no serious evidence,” he said.
Chaudhuri added the lenders are not enthused about the Rs 11,000-crore Diageo-USL deal, which might have implications due to USL share sale by banks. Lenders have not participated in the open offer of Diageo.
“We are now indifferent to that. Our first priority is to recover the loans. What happens later to another investor of this, happens later. Any investor comes in with eyes open,” he said, stressing the banks were not hurting anyone’s interests as they were selling the USL shares above the open offer price of Rs 1,440 a share.
Associate bank merger
SBI might merge one of its associate banks in the current financial year, and for that, the bank will need to raise capital, said Chaudhuri. SBI had earlier merged two of its seven associates — State Bank of Saurashtra in 2008 and State Bank of Indore in 2010. “We will definitely think of a merger this year. As the capital base expands, we will definitely think. This year, the capital position should be comfortable,” said Chaudhuri, who played a role in the merger of State Bank of Indore with SBI.
He added the bank would need additional capital if the mergers were to happen and will explore all routes, including a qualified institutional placement (QIP) to expand capital base.
“For QIP, we will have to talk to the government. We think it is theoretically possible. Government stake (in SBI) is 63 per cent, and even if it goes down to 58 per cent, there should not be a problem,” he said, adding it could raise as much as Rs 10,000-14,000 crore through this route.
Chaudhuri said the other two routes of capital raising — internal accruals, estimated (Rs 15,000 crore and government infusion of Rs 3,000 crore) — were the more certain ones, while QIP was ‘variable’.
According to Pratip Chaudhuri, chairman, the gross non-performing assets (NPA) are expected to come down to 4.5 per cent of the total in March-end, from 5.3 per cent in end-December.
In absolute terms, the gross NPA figure will be Rs 49,000 crore, down from Rs 53,458 crore as on December-end. Between March and December 2012, SBI’s gross NPA increased from Rs 39,676 crore — 4.44 per cent of gross advances — to Rs 53,458 crore.
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Late surge in loan growth
A surge in loan growth in the last two months of FY13 has helped SBI clock an impressive growth of 21 per cent in the last financial year, much better than the 16-18 per cent projected by the bank.
Speaking at a media conference, Chaudhuri said, “The big push on loan growth came in end-February. The main driver was demand from the corporate sector. The demand from the retail sector was steady. The demand for project loans was not significant.”
In retail, while home loan growth was about 30 per cent, automobile loans have grown 25 per cent.
Deposit growth for FY13 was close to 15 per cent, despite cutting the bulk deposit portfolio. “At financial year-end, we generally get a lot of government funds. Those funds are parked in SBI and then disbursed. We have ended the year with a deposit growth of 14.88 per cent, despite shedding bulk deposits to one per cent from 4.5 per cent,” he said adding SBI had additional liquidity of Rs 40,000 crore.
Expectation from RBI
While indicating the bank was not in a hurry to cut interest rates, the SBI chairman said the Reserve Bank of India (RBI) should cut the cash reserve ratio (CRR) by 100 bps in the annual monetary policy review scheduled on May 3, “given the recent developments (fall in commodity prices) ... This will help us reduce the base rate by 20 bps,” said Chaudhuri, adding a repo cut alone might not induce an interest rate cut. SBI’s base rate is currently 9.7 per cent.
CRR is the amount of deposits banks need to park with RBI as cash. RBI does not pay interest for CRR balance. The central bank had reduced CRR by 200 bps between January 2012 and January 2013, but has not reduced it in the mid-quarter review held in March. Currently, CRR is four per cent.
On Kingfisher
The SBI chairman reiterated the lenders’ consortium will continue to sell pledged United Spirits (USL) shares and then all other assets to recover dues from the grounded airline. He said, “We have given instructions to recover and to enforce all the securities. Our intention is to sell everything... all means of recovery (will be employed)... nothing would escape. Till such time as we will get back our dues in full, we will press our full recourse on all the securities that we possess.” He added the banks would first sell the shares, followed by other liquid assets, then fixed assets and finally personal assets.
SBI, the leader of the lenders’ consortium, has an exposure of Rs 1,600 crore to Kingfisher Airlines. The total exposure of all banks in the airline is Rs 7,000 crore.
When asked about recent reports of revival of the airline, grounded since October last year, Chaudhuri said the banks have run out of patience. “We are not very keen. I think we have waited long enough. And all other airlines with whom we have a transaction have submitted revival plans and worked on them. In this case, there are no serious evidence,” he said.
Chaudhuri added the lenders are not enthused about the Rs 11,000-crore Diageo-USL deal, which might have implications due to USL share sale by banks. Lenders have not participated in the open offer of Diageo.
“We are now indifferent to that. Our first priority is to recover the loans. What happens later to another investor of this, happens later. Any investor comes in with eyes open,” he said, stressing the banks were not hurting anyone’s interests as they were selling the USL shares above the open offer price of Rs 1,440 a share.
Associate bank merger
SBI might merge one of its associate banks in the current financial year, and for that, the bank will need to raise capital, said Chaudhuri. SBI had earlier merged two of its seven associates — State Bank of Saurashtra in 2008 and State Bank of Indore in 2010. “We will definitely think of a merger this year. As the capital base expands, we will definitely think. This year, the capital position should be comfortable,” said Chaudhuri, who played a role in the merger of State Bank of Indore with SBI.
He added the bank would need additional capital if the mergers were to happen and will explore all routes, including a qualified institutional placement (QIP) to expand capital base.
“For QIP, we will have to talk to the government. We think it is theoretically possible. Government stake (in SBI) is 63 per cent, and even if it goes down to 58 per cent, there should not be a problem,” he said, adding it could raise as much as Rs 10,000-14,000 crore through this route.
Chaudhuri said the other two routes of capital raising — internal accruals, estimated (Rs 15,000 crore and government infusion of Rs 3,000 crore) — were the more certain ones, while QIP was ‘variable’.