Low oil prices may help cos improve performance: SBI report

Low oil and commodity prices are likely to help companies post better earnings numbers in the fourth quarter of the just-concluded fiscal, a SBI report said.
The report added that net sales are likely to rise at a lower pace than growth in operating profit margins during the period.
"The good thing is that Mudra has been a beneficiary of credit growth. Low oil and commodity prices are likely to help companies post better Q4FY16 numbers," the SBI Ecowrap report said here today.
Within industries, credit growth shows concentration risk in stressed sectors like iron and steel and select infrastructure credit, mainly power and telecommunication.

While operating profits may rise by about 5-6 per cent, net sales are likely to rise at a lower pace than growth in operating profit margins. Cement, IT, auto manufacturers are expected to register better volume sales in this quarter compared to earlier corresponding quarter, it said.
The yearly SBI Composite Index for April 2016 has increased moderately to 52.2, a five-month high, compared to the last month's low decline of 49.5 due to better market factors, a SBI report said.

However, the monthly index declined as low as to 46.5 in April, an 18-month low, from a moderate growth 54.5 in March mainly due to seasonality. This indicates that recovery is still slow and patchy, the report said.

"We believe it is too early to rejoice at credit growth picking up. In FY16, the credit off-take (YoY) has indeed shown some signs of improvement and was at 11.3 per cent as on March 18. However, as per April 1 (figures) credit growth has declined to 10.2 per cent," SBI's chief economic adviser and general manager, economic research department," Soumya Kanti Ghosh said.
In fact, a large part of loans sanctioned in the year are takeover loans from other banks or financial institutions. The point of concern is that the incremental lending has been mostly to the personal loan segment, particularly credit card (and also housing), the report said.

Increased presence in all terrains and geographies will
increase bank's deposit raising capacity and bring down the cost of funds further. Thus, the benefit so derived will flow on to the customers in the form of improved services, borrowing costs etc, it added.
The bank also expects the merger to fasten the roll out of digital initiatives, which is currently hamstrung by existence of different entities with separate managements causing a lag in implementation across the the SBI Group.
It also expects reduction in overheads, administrative offices, and centralisation of treasury will lead to major reduction in operating costs.
Post mergers, the bank will re-deploy manpower in customer facing roles with a sharper marketing focus. The same is expected to create a superior customer experience.

On the additional capital requirement (which the chairperson had earlier pegged at around Rs 3,000 crore) arising due to the mergers will be met through the resultant increase in efficiencies and economies of scale.
During the June quarter earnings, chairperson Arundhati Bhattacharya had said that the merger will lead to shuttering of the treasury desks of the merged entities but had ruled out massive closure of retail branches, though she said there would be rationalisation of branches specially in cities.
The SBI had first merged State Bank of Saurashtra with itself in 2008. Two years later, State Bank of Indore was merged.

SBI was founded on June 2, 1806, as Bank of Calcutta and on 27 January 1921, it was renamed as the Imperial Bank of India. On July 1, 1955, it was formally named as State Bank of India after nationalisation.