Analyst Meet / AGM - Analyst Meet

24-May-2013, 03:40
State Bank of India conducted an analyst meet on 23 May 2013 to discuss the financial results for the quarter and year ended March 2013 and prospects of the bank. Pratip Chaudhuri, Chairman along with his colleagues addressed the meet:

Highlights:

• The domestic NIM of the bank declined to 3.66% in FY2013 from 4.17% in FY2012. NIM of the bank was impacted by higher interest income reversal, aggressive pricing for higher rated borrowers, steady cost of deposits etc.
• The shifting of pension fund from HTM to trust had an impact of 30 bps on NIM for FY2013. However, the positive thing is that the income from pension trust fund is tax free. The size of the pension fund stands at Rs 39000 crore.
• Bank expects to maintain the domestic NIM at 3.6% for FY2014, while the overseas NIM is anticipated at 1.5% in FY2014.
• Bank has reversed the loss of sale on investment in FY2012 to profit in FY2013. Bank claims to be holding the quality equity portfolio, while proposes to invest in only Nifty 50 companies.
• The CASA ratio of the bank was steady at 46.5% at end March 2013 compared to 46.6% a year ago, while the share of bulk deposits was at mere 1%.
• Bank has the excess liquidity of Rs 42000 crore, while it has access to Rs 20000 crore of refinance facilities from RBI.
• Bank has improved the market share in deposits to 16.46% as well as advances to 16.66% in FY2013.
• Bank has met the direct agriculture lending target of 14% under priority sector lending (PSL) obligations, while at 16% it was short of overall agriculture lending target of 18%.
• The overall PSL lending of the bank stood at 36.5% at end March 2013 against the regulatory requirement of 40%. However, bank proposes to improve the PSL lending to 40% in FY2014.
• Bank continues to be leader in home, auto and education loans segment accounting for up to quarter share in overall banking system lending. The GNPA in auto loans stood at 1.06%, while that in home loan was also lower at 1.0%.
• The home and auto loan segments recorded healthy growth, while the growth of the education loan segment decelerated in FY2013 with the Government of Andhra Pradesh, one of the major state consuming educational loans, decided to pay the tuitions fees of engineering students.
• Bank restructured advances worth Rs 8700 crore in Q4FY2013 pushing up the overall restructured advances book to Rs 32228 crore at end March 2013 from Rs 23845 crore at end December 2012.
• The major accounts restructured included Suzlon at Rs 1800 crore, Sasan Power at Rs 1060 crore, Jindal Thermal at Rs 530 crore etc.
• Bank has the restructuring pipeline of Rs 2800 crore for first half of FY2014.
• Bank has made strong recovery in written off accounts, which is attributed to staff incentive scheme to recover bad debts.
• About 20000 new staff joined in the assistant segment in rural and semi urban branches during quarter ended March 2013. The cost of new staff is expected at Rs 680 crore for FY2013, which would be covered by generation of incremental revenues.
• As per the bank about 7000 employees retire every year. The assistant-to-officer ratio of the bank increased to 1.36% at end March 2013 from 1.19% at end March 2012.
• Bank proposes to increase the assistant-to-officer ratio to 2% to save on higher cost of officers which is three to four times the assistant.
• Bank proposes to put extra efforts to reduce cost-to-income ratio in FY2014.
• In calculating the pension and gratuity contribution, bank has assumed the pension escalation rate of 2%, salary escalation rate of 5%, discount rate of 8.5% and life expectancy of 76 years.
• Bank has made a provision for wage hike at the rate of 15% for the period of November 2012 to March 2013.
• Bank has added about 700 branches in FY2013, while it would add 200-300 new branches in Q1FY2014. Bank intends to raise the share of metro branches in overall branch count, currently standing at 15.8%
• Bank is ramping up its onsite ATMs count. Bank would be adding 5000 onsite ATMs in FY2014, with the target to have onsite ATM for all branches.
• Banks borrowing from RBI at repo window stands at Rs 30000 crore, so if RBI reduces the repo rate by 25 bps it would save Rs 75 crore on interest cost for the bank, but that do not provides any room for base rate cut.
• On fee income front, bank has raised the LC/BG charges and would not provide concessions to the below investment grade clients in the absence of strong securities.
• Bank had to forgo around Rs 250 crore on account of waiver of SB account maintenance charges. Hoverer, this was compensated by increase in ATM usage charges. As per bank, the loss the income due to waiver of SB account maintenance charge can also be compensated by increase in SB deposits by Rs 20000 crore.
• Bank expects the credit growth of 20-25%, while deposits are projected to increase 20-24% in FY2013.
• The advances in the home loan segment are rising by Rs 3000-3500 crore per month. As per the bank credit growth for FY2014 would be driven by about Rs 40000 crore increase in homes loans, Rs 5-10000 crore of auto loans, Rs 20000 crore agriculture advance etc, while bank also expect the refinancing to contribute to credit growth in FY2014. As per the bank, about 20% of the incremental lending related to refinancing.
• Bank has installed the gold purity verifying machines at gold loan offering branches. Bank has kept the margin for gold loans at 30%.
• The credit-to-deposit ratio of the bank has increased sharply as the bank has surplus liquidity, sufficient refinancing from RBI, capital infusion from Government etc.
• Although the credit-deposit ratio was higher at 82.4% at end March 2013, the total stable funding available to the bank stood at 115% comprising 15% of capital funding.
• Bank proposes to improve the asset quality with the larger incremental lending to higher investment grade borrowers even with the lower yields or with the back up of 120-130% collaterals.
• Bank has taken the ECGC insurance to its entire export credit portfolio, while SME advances below Rs 1 crore are also covered with CGTSME insurance.
• Bank is planning to issue Tier II bond abroad, as they do not attract the CRR and SLR requirement.
• Regarding the bad loan exposure to Kingfisher Airlines, bank has recovered Rs 135 crore from sale of shares, while it is planning to file DRT proposal very soon.
• With the comfortable Tier-I capital positions, bank is considering the merger of unlisted subsidiary bank i.e. State Bank of Hyderabad or State Bank of Patiala. The timing of merger is likely to be second or third quarter of FY2013, while the merger will depend upon the size of the bank and ease of the merger.
• Bank expects the tax rate of 34-35% for FY2014.

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