State Bank of India, the nation’s biggest lender, is poised to name 36-year veteran Pratip Chaudhuri as its new chairman.
Deputy Managing Director Chaudhuri, 57, was the only person recommended to a cabinet committee tasked with selecting the head of the state-controlled bank, a finance ministry official said on March 11, declining to be identified before an official announcement. Chaudhuri didn’t return three telephone calls to his office in Mumbai.
Chaudhuri’s task of boosting shareholder returns at the 205-year-old lender may be hampered by state control that gives private-sector rivals an edge in mobile and Internet banking, said hedge fund manager Vikas Pershad. Goldman Sachs Group Inc and Morgan Stanley are seeking licences in the world’s second-fastest growing major economy.
“Now private banks are better positioned to capture growth,” said Pershad, Chicago-based chief executive officer of Veda Investments LLC. “Over the next five years, if I think of which bank in India will perform the best in terms of return on equity and share price, I find it difficult to believe SBI will be first, second or third.”
Stock performance
State Bank has more than tripled in the past five years, compared with a 66 per cent gain in ICICI, according to data compiled by Bloomberg. The stock shed 1 per cent to Rs 2,565.15 in Mumbai trading on March 11, giving the lender a market capitalisation of $36 billion.
Chairman Om Prakash Bhatt, who began his term as head of the Mumbai-based bank in July 2006, will retire at the end of this month. During his tenure, the bank’s loans climbed almost threefold to Rs 7.4 lakh crore ($164 billion) as of December 31, and deposits more than doubled to Rs 8.79 lakh crore.
Chaudhuri, who started with State Bank in 1974, was put in charge of international banking operations in April 2009.
The new chairman of State Bank will need to attract deposits and raise capital in a banking system with tighter liquidity constraints, Brian Hunsaker, an analyst at Keefe, Bruyette & Woods Asia Ltd. in Hong Kong, said on March 12 from London. The lender will also need to expand lending while curtailing growth of bad loans, he said.
‘Immediate challenge’
ICICI, whose loans and deposits shrank for almost two years as Chief Executive Officer Chanda Kochhar sought to curb unsecured lending and reduce the cost of funds, will also be a tougher competitor, Hunsaker said. The lender in January said profit for the quarter ended December 31 rose 31 per cent to a record as loans increased and provisions for bad debts declined.
The nation’s largest non-state lender plans to add 500 branches a year, Kochhar said on January 28. ICICI has more than 2,500 outlets, according to its website. That’s about a fifth of the more than 12,400 branches operated by State Bank.
