India’s largest lender, State Bank of India and its associates, fell behind other banks operating in India in efficiency in 2010-11, with a fall in both profit per employee and return on assets, compared to the previous year.
“Profitability in terms of return on assets of all scheduled commercial banks at the aggregate level improved during 2010-11. All bank groups witnessed an increase in return on assets during 2010-11, except State Bank of India and its associates, which witnessed a decline in return on assets,”The Reserve Bank of India (RBI) said on Friday.
SBI, which had recorded a 99 per cent per cent dip in net profit in the fourth quarter ending March 31, saw its profitability per employee down to Rs 3,85,000 in 2010-2011, against Rs 4,46,000 in 2009-2010. According to RBI, the return on assets also fell on a standalone basis to 0.71 per cent in FY11 from 0.88 per cent in the year before.
For the SBI group, profit per employee and return on assets fell for the bank and its associates. Profit per employee fell from Rs 4,70,000 to Rs 4,20,000 and return on assets was down to 0.79 per cent from 0.91 per cent.
SBI’s profits had been marred in the previous financial year on account of higher provisioning for both non-performing assets and staff related issues. The bank also has to provide nearly Rs 8,000 crore from its capital reserve for pension, which led to a fall in the bank’s capital adequacy ratio.
| BANKS’ PERFORMANCE IN 2010-11 | |||||
| Bank | Business per employee (in Rs lakh) | Profit per employee (in Rs lakh) | Return on assets (%) | Capital adequacy (%) | Net NPA ratio (%) |
| SBI | 704.00 | 3.85 | 0.71 | 11.98 | 1.63 |
| PNB | 1018.00 | 8.35 | 1.34 | 12.42 | 0.85 |
| Bank of Baroda | 1333.00 | 11.00 | 1.33 | 14.52 | 0.35 |
| ICICI Bank | 735.00 | 10.00 | 1.35 | 19.54 | 1.11 |
| HDFC Bank | 653.00 | 7.37 | 1.58 | 16.22 | 0.19 |
| Source: Reserve Bank of India | |||||
The burden on account of provisions has continued in the current financial year. The public sector bank had to make a provision for loan loss and investment depreciation in the first quarter ending June, which led to a fall of 46 per cent in its net profits in the first quarter of FY12.
On a comparative basis, profit per employee for ICICI Bank, the largest private sector lender in India, increased to Rs 10,00,000 for 2010-2011, against Rs 9,00,000 in the previous year. Its return on assets rose to 1.35 per cent from 1.13 per cent. Punjab National Bank, the second largest lender in the public sector space, has also seen an increase in its profit per employee to Rs 8,30,000 from Rs 7,30,000 during the reporting period. The data also shows the capital adequacy ratio of all banks declined during FY11.