India’s largest banking group, State Bank
of India (SBI), has reported an analyst-beating total net profit of
INR91.2 billion ($1.84 billion) for the fiscal year to 31 March, up
35.5 percent year-on-year, boosted by loan growth of 30 percent,
almost double the industry average of 17.3 percent for the
year.
But despite huge market share gains and a
massive increase in its branch network, SBI’s retail earnings
growth of 28.6 percent for the year failed to match peers HDFC
Bank, Axis Bank and Bank of Baroda (see results round-up, RBI
611). HDFC’s retail banking profits rose 134 percent across
the period, for instance.
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SBI has been on a high-profile offensive over
the past 12 months, upping its game across all distribution
channels and retail banking business lines, including insurance and
wealth management. It says it has now become the single largest
retail lender in India off the back of strong demand for its
education loans (up by 50 percent across the year), auto loans (36
percent) and mortgages (21 percent).
The bank’s branch numbers increased from
10,186 units to 11,448 at year-end while ATM numbers soared by 44
percent to 8,581. The bank says it has plans for 13,000 group ATMs
by the end of fiscal 2010.
Significantly, transactions on its internet
banking platform were up by 279 percent, and the bank said its
share of retail banking transactions via alternate channels
increased to 17.5 percent from 14.7 percent. All 11,448 branches
are now, for the first time, also connected to a single corporate
internet banking platform.
Benefited from a flight to
safety
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By GlobalDataSBI, 59.4 percent owned by the Indian
government, benefited from a flight to safety among depositors:
term deposits were up 44.8 percent year-on-year to INR4.3
trillion.
The bank’s low cost CASA deposits – current
accounts and low cost savings accounts – grew more modestly, up by
17.8 percent.
Efforts to grow its share of deposits were
boosted by market-beating returns SBI’s rivals could not match – it
was offering, for instance, a rate of 10.5 percent on term deposits
of 1,000 days. In the third quarter, in particular, SBI was
hoovering up around INR10 billion a day by way of term
deposits.
But in a year in which margins came under
pressure, the bank’s net interest margin slipped 14 basis points to
2.93 percent as it chased market share by cutting loan rates (in
contrast, private sector rival HDFC Bank reported a net interest
margin of 4.2 percent in a peer-beating performance).
Net interest income (NII) in the fourth
quarter in particular declined steeply, signalling that the
ever-increasing competition in the Indian market and SBI’s
aggressive tactics could hit profits over the next 12 months. NII
in the fourth quarter was INR48.4 billion, up 0.9 percent compared
with a year ago.
While SBI’s gross non-performing assets jumped
21 percent to INR155.9 billion, it successfully reduced its gross
bad debts as a percentage of loans ratio by 20 basis points
year-on-year to 2.84 percent.
Looking ahead, SBI seems bullish. It says it
believes the worst of the economic crisis is over and expects to
contain its non-performing assets at current levels. It is
forecasting a slight reduction in deposit and lending growth, at
around 25 percent this year, though it expects to outperform its
Indian peers.
The bank will press on with plans to raise
fresh capital – INR200 billion in the current fiscal year is the
expected target of a rights issue – to fund further expansion,
including around 1,000 additional new branches.
It is also considering upping its retail
banking operations outside of India: it launched full retail
banking operations in Singapore in October last year, and the four
branches have attracted $70 million over the past six months. SBI
says it will have eight branches by 2010 and initiatives are
underway to build business in the US, the UK and the United Arab
Emirates.
SBI’s cost-income ratio declined by 241 basis
points to 46.62 percent for the year.
