Analyst Meet / AGM - Analyst Meet

13-Aug-2016, 07:45
State Bank of India conducted an analyst meet on 12 August 2016 to discuss the financial performance for the quarter ended June 2016 and prospects of the bank. Arundhati Bhattacharya, Chairman of the bank addressed the meet:

Highlights:

• Bank has recorded strong 20% growth in the operating profit. NII rose at steady pace of 4%, while non-interest income jumped 20% driven by strong surge in profit on sale of investment at 212% to Rs 2723 crore. The proceeds from the sale of stake in NSE of Rs 908 crore along strong treasury performance boosted the overall profit on sale of investment for the bank in Q1FY2017. Even excluding NSE stake sale, the non-interest income improves 26% in Q1FY2017.
• The forex income advanced 22% to Rs 596 crore, which is mainly driven by the margin improvement.
• The bank has improved cost-to-income ratio to 48.9% in Q1FY2017. About 4000 employees of the retired during Q1FY2017. Bank expects to contain opex growth in the range of 10-11% in FY2017. Overall, bank proposes to reduce cost-to-income ratio below 45% in next three years.
• The loan of the bank increased 11% at Rs 14.64 lakh crore at end June 2016, while bank has gained 32 bps domestic loans share. The bank aims to achieve credit growth of 12-13% in FY2017, to be driven by retail credit and good quality corporate book.
• Deposits increased 10% at Rs 17.82 crore at end June 2016. Bank has improved domestic CASA deposits ratio to 42.8% at end June 2016 from 41.7% at end June 2015.
• About US$ 1.8 billion of FCNR deposit with the bank are due to mature in Q3FY2017.
• The NIM of the bank declined to 2.83% in Q1FY2017. Bank expects the NIMs to be stable ahead.

Asset Quality

• Bank has contained the fresh slippages at 2.3% against the guidance of 2.7%, while credit cost also remained lower at 1.68% against the target of 1.8%. Bank has improved recoveries and upgradations.
• Out of Rs 3681 crore of slippages in the corporate book, Rs 2947 crore were from the watch list accounts. The international banking group (IBG) contributed slippages of Rs 987 crore in Q1FY2017.
• The slippages ratio for the restructured advance book eased to 8.17% in Q1FY2017 from 22.02% in Q4FY2016. Standard restructured advance book of the bank declined to Rs 36551 crore (2.49% of advances) at end June 2016.
• Bank has improved provision coverage ratio to 61.57% at end June 2016 from 60.69% at end March 2016.
• However, bank has maintained the watchlist account size at Rs 31000 crore, as bank had excluded watchlist account of Rs 3000 crore from the IBG earlier, which stands added now. About 30% of the watchlist accounts relates to non-fund based exposure.
• With a view to strengthen asset quality, bank has focusing on raising the share of retail loan. The retail loans share has increased to 23% from 21% a year ago. The bank is focusing on acquiring investment grade asset and cash flow based financing, while it has completely revamped the SME credit process. The bank is holding mega-auction on 07 September with more than 1350 properties.
• The outstanding balance under 5/25 refinancing scheme stood at 19000 crore, of which Rs 6825 crore have slipped to the NPA category. The SDR outstanding balance stands at Rs 18121 crore, of which Rs 10173 crore has slipped to the NPA category.

Merger of Associate banks

• Valuation process is likely to be completed in next one month, while the treasuries are ready for merger.
• Asset classification of common corporate borrower is being aligned.
• The Asset Quality Review (AQR) of associate banks different from SBI. So in the process of alignment with the parent, the associate banks have exhibited asset quality pressure and higher credit cost. The pressure may continue for Q2 of FY2017.
• The watchlist account size of the associate banks stands at Rs 12000 crore.
• The associate bank outstanding balance under 5/25 refinancing scheme stands at Rs 9590 crore, while SDR outstanding balance stands at Rs 9524 crore. The restructured advances of the associate banks stood at Rs 24000 crore.
• GNPA ratio of increased to 9.14% at end June 2016 from 5.98% at end March 2016. Credit cost increased to 5.56% in Q1FY2016 from 3.18% in Q4FY2016.
• Rationalization of branches review is under process. Some branches are likely to be relocated or merged.
• In lieu of 6 corporate offices of merging entities, two new local head offices are being planned.

Capital planning

• Bank has improved Capital Adequacy ratio to 14.01% at end June 2016 from 13.2% at end March 2016. Revaluation of Real Estate Assets has boosted CET-I capital by Rs14384 crore in Q1FY2017. As per the bank, after ploughing back of Q1FY2017 profit, the capital adequacy improves by further 14 bps.
• Bank is expecting capital infusion of Rs 7575 crore from GoI in FY2017, while it has planned sale of non-core assets and strategic investments to the tune of Rs 3000 crore of which Rs 907 crore is already received in Q1FY2017.

Subsidiaries

• SBI Life Insurance has recorded 6% growth in the net profit to Rs 215 crore in Q1FY2017. The company has posted 78% surge in the new business premium collection to Rs 1866 crore in Q1FY2017.
• The Embedded Value (EV) in the Life Insurance context being a realistic measure is being published for the First time. The EV of the SBI Life Insurance stands at Rs12,999 crore at end March 2016.
• SBI Mutual Fund has improved industry rank to fifth position from sixth a year ago, while its expected to further improve rank by end March 2017.
• SBI General has reported quarterly profit for the first time since inception.

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