Analyst Meet / AGM - Analyst Meet

12-Nov-2016, 11:53
State Bank of India conducted an analyst meet on 11 November 2016 to discuss the financial performance for the quarter ended September 2016 and prospects of the bank. Arundhati Bhattacharya, Chairman of the bank addressed the meet:

Highlights:

• The bank has sustained strong operating performance in the quarter ended September 2016.
• The bank has also continued to maintain tight leash on operating expenses, helping to improve cost-to-income ratio.
• With the focus on a retail business, the bank has improved the share of retail advances to 53% at end September 2016. The corporate advances accounted for 43% of the total advances and the remaining advances were miscellaneous.
• The bank is well capitalized with the capital adequacy ratio 13.94% at end September 2016. Factoring in ploughing back of retained earnings and government capital infusion, the capital adequacy ratio rises to 14.6%.

Non-interest income

• The bank has posted strong 37% growth in its non interest income in the quarter ended September 2016. Fee income increased 27% which includes Rs 796 crore of service tax refund paid to the government earlier on government commission receipt.
• With the support of favourable market condition, the bank has posted strong growth in treasury income.
• The bank has also posted strong growth in foreign exchange earnings driven by Iranian oil payments going through the bank.
• The dividend income of the bank was boosted by the receipt of dividend from Mauritius subsidiary in the quarter ended September 2016.

Liabilities

• The bank has continued to improve CASA deposit ratio. More importantly the bank has also gained market CASA deposits share.

Assets

• The loan growth of the bank has moderated to 8% at end September 2016. However, including CPs and corporate bond investment, the loan growth was higher at 8.9%.

Operating expenses

• The bank has made additional provision of Rs 600 crore for employee pension benefits contributing to the rise in operating expenses of the bank for the quarter ended September 2016.

Asset quality

• On asset quality front, the bank is observing improved visibility or asset quality resolution.
• The bank has exhibited improvement in its provision coverage ratio, as the NPA provisions have doubled in the quarter ended September 2016.
• The bank has recorded slippages of Rs 10341 crore in the quarter ended September 2016. The fresh slippages of advances was contributed by watch list account (Rs 4853 crore) crore as well as restructured advances (Rs 3800 crore).
• The size of watchlist account has declined to Rs 25951 crore at end September 2016 from Rs 34776 crore at end March 2016.
• The associate banks aggressive recognizing of the stressed assets caused higher slippages and increase in NPAs for the associate banks in H1FY2017. As per the bank, associate banks have recognized about 95% of the asset quality pain.
• The consolidated Gross NPA ratio stood at 8.53%, while the Net NPA ratio stood at 5.12% at end September 2016. The consolidated provision coverage ratio stood at 58.58%.
• The bank has exposure of Rs 1362 billion of loans to the power sector. Of this Rs 56000 crore is towards public sector power companies. Within the private power sector exposure of Rs 76690 crore, Rs 35200 crore of exposure is rated A+ and above, Rs 20000 crore is rated up to BBB, Rs 21100 crore is rated below BBB.
• The exposure to the SEB stands at Rs 14300 crore, of which Rs 6700 crore is towards stressed SEBs with TN SEB at Rs 5800 crore. Among other SEBs, the bank has fully converted the exposure to UP Power Corporation into bonds, while exposure to the Punjab State Electricity Board is converted up to 75% into the bonds. Bank does not have any stress in rest of the SEB exposure.
• Sector wise, fresh slippages from large corporate stood at Rs 744 crore, mid corporate Rs 5931 crore, SME Rs 2117 crore, agriculture Rs 663 crore, retail Rs 678 crore and foreign Rs 208 crore.
• The bank has maintained fresh slippages guidance of Rs 40000 crore for FY2017.
• The outstanding refinancing under 5/25 scheme stands at Rs 9456 crore, SDR at Rs 6630 crore and S4A Rs 2825 crore at end September 2016.
• Investment book of the bank stood at Rs 6 lakh crore of which 36% was into the AFS category. The duration of the AFS investment book stood at 2.66 years.
• The bank has made recoveries of Rs 285 crore under mega auction sale held in the first week of September 2016. The bank proposes to conduct next mega auction sale in the first week of December 2016.

Merger of associate banks

• The process of associate bank is on course and is expected to be value accretive. Effective date of the Merger would be decided after to the government notification.
• The bank expects the positive PBT impact of Rs 2050 crore to Rs 2750 crore over next 2 to 3 years.

Currency demonetization

• The bank has been working hard to help the people to deposit their currency notes with the Bank.
• In the last two days, the bank has received deposits of Rs 33000 crore.
• On 10 November 2016, the bank received inflows of Rs 11000 crore into savings accounts and Rs 7000 crore into current accounts. The bank actually witness monthly savings account inflows of Rs 8000 crore.
• On 11 November 2016, the bank has operationalised about 21000 ATM and 7000 cash acceptor machines, while it expects all operation by 12 November 2016.
• The bank expects overall inflows of Rs 2 to 2.5 lakh crore because of demonetization of high denomination notes.

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