Supreme Court to begin hearing SBI's plea against Anil Ambani today

 Indian lenders are keenly watching the outcome of a petition filed by State Bank of India (SBI) in the Supreme Court, which invoked the personal guarantees of Anil Ambani. The SC will hear the petition from Thursday.

A banker said Ambani has objected to the SBI invoking personal guarantees under the Corporate Debtors Regulations, 2019. Till November, the IBC only covered Indian companies and not promoters. The new rules are applicable against the personal guarantors given to loans above Rs 1,000 crore or more by promoters. “As Ambani’s will be the first case where personal guarantees have been invoked and is now in SC, it will decide the fate of 40 other top defaulters who were sent to NCLT since IBC law came into effect in 2017,” said a banker. In its petition to the SC, SBI said several promoters have moved the Delhi High Court after their personal guarantees have been invoked.

The fate of dues worth Rs 45,000 crore, including to the Chinese banks, will be decided by the NCLT where the matter is still pending, and the personal guarantee matter will be heard by the top court.

On September 7, the SBI also invoked the personal guarantees of Sanjay Singal, promoter of Bhushan Power & Steel, as the company defaulted to loans worth Rs 48,000 crore. The debt resolution of the company is almost ready in the NCLT, with JSW Steel declared the highest bidder with a Rs 19,700-crore offer. The matter is currently pending in the SC after JSW Steel sought its intervention on not holding the firm liable for any criminal acts of the previous promoter. The SC will come out with its verdict on this issue this month.

August inflation number could be 'unpleasant', says SBI Research report

 The report, written by the state-owned lender's chief economist Soumya Kanti Ghosh, says India's central bank could succeed in inflation targeting by "reaching the 4 per cent target over a particular business cycle rather than for a particular date such as two year ahead".

"We expect August inflation numbers to be elevated at around 7% or even higher and if the base effect is the primary reason, inflation could only come down to below 4% possibly beyond December,” says the report attributed to SBI Research and titled 'August Inflation Numbers Could Be Unpleasant: Rate Cut Hopes Fade?'

"However, it looks difficult to believe that supply disruptions would normalise against the huge upsurge in pandemic in rural areas and this now poses an upside risk to inflation numbers. We are thus less hopeful of any rate cut in current fiscal / at best 25 bps as February MPC meeting would consider December inflation only,” the report says, referring to the Reserve Bank of India's Monetary Policy Committee.

Ratings agency Fitch on Tuesday sharply lowered its forecast for India's gross domestic product (GDP) growth for the current fiscal 2020-21 (FY21) and now expects the country's GDP to contract 10.5 per cent versus its earlier estimate of 5 per cent contraction in this period.

“The severe fall in activity has damaged household and corporate incomes and balance sheets, amid limited fiscal support. A looming deterioration in asset quality in the financial sector will hold back credit provision amid weak bank capital buffers. Furthermore, high inflation has added strains to household income,” Fitch said.

SBI plans VRS scheme covering 30,000 staff as it seeks to optimise costs

  In a bid to optimise its costs, the State Bank of India (SBI) has planned a voluntary retirement scheme (VRS) under which about 30,190 employees are eligible.

The total employee strength of country's largest lender stood at 249,000 at the end of March 2020 as compared to 257,000 a year ago.

According to sources, a draft scheme for VRS has been prepared and board approval is awaited.

The proposed scheme -- 'Second Innings Tap VRS-2020' -- is aimed at optimising human resources and costs of the bank.

Besides, the draft scheme, seen by PTI, said it will provide an option and a respectable exit route to employees who have reached a level of saturation in their career, may not be at the peak of their performance, have some personal issue or want to pursue their professional or personal life outside the bank.

The scheme will be opened to all permanent officers and staff who have put in 25 years of service or have completed 55 years of age on the cut-off date.

The scheme will open on December 1 and will remain open till the end of February, it said, adding that applications for VRS will be accepted during this period only.

As per the proposed eligibility criteria, a total of 11,565 officers and 18,625 staff members will be eligible for the scheme.

The total net savings for the bank would be Rs 1,662.86 crore if 30 per cent of eligible employees opt for retirement under the scheme, as per estimates based on July 2020 salary, it said.

"The staff member whose request for retirement under VRS is accepted will be paid an ex-gratia amounting 50 per cent of salary for the residual period of service (up to the date of superannuation), subject to a maximum of 18 months' last drawn salary," it said.

Other benefits like gratuity, pension, provident and medical benefits will be given to employees seeking VRS.

A staff member retired under the scheme will be eligible for engagement or re-employment in the bank after a cooling-off period of two years from the date of retirement.

Ahead of amalgamation of SBI's five associates with it in 2017, the merging subsidiaries had announced VRS for their employees.

In 2001 also the bank had announced VRS with the objective to optimise human resources.

However, the proposed VRS scheme is not finding favour with bank unions.

Such a move at a time when the country is in the grip of coronavirus (Covid-19) pandemic reflects anti-worker attitude of management, National Organisation of Bank Workers Vice President Ashwani Rana said.

Ahead of IPO, SBI Cards sees fintechs, UPI as formidable competition

SBICards and Payment Services has stated new-age fintech-led payments mode, including Unified Payments Interface (UPI), as formidable competitors, in a filing of prospectus for its upcoming initial public offering (IPO).
Before going for an IPO, it is mandatory for a company to list out its risk factors so that the public is able to make an informed decision.

In its prospectus, SBI Cards said the primary competition for the company continued to be other credit card issuers, and debit card issuers to a certain extent.
However, new players with innovative products have emerged. The credit card company has competitions from businesses that operate their own mobile wallets or extend credit to their customers and other fintech service providers.
"Mobile, e-wallet, and tokenisation platforms, including the increasingly prevalent UPI, may present formidable competition as they are able to attract large payment volumes at low or no payment processing fees to merchants," SBI Cards said in its prospectus.
SBI Cards expects competition to intensify in future. For example, many credit card issuers have instituted rewards programmes that could be on a par or better in the eyes of the customers.
"As competitive pressures intensify, we may be required to expend additional resources to offer a more attractive value proposition to our cardholders, which could negatively impact our profit margins. In addition, although we continue to benefit from relatively high interest rates on our general purpose credit card portfolio, increasing competition may exert downward pressures on the interest rates we are able to charge our customers, which would ultimately erode our margins," the company said.
SBI Cards' asset quality remained largely healthy. As of December 31, the gross non-performing assets (NPAs) as percentage of gross advances was 2.47 per cent, and net NPA as percentage of net advances was 0.83 per cent.
This is a slight deterioration from the March 31, 2019, level when the gross NPA ratio was 2.44 per cent and net NPA ratio was at 0.83 per cent. In March 2018, the gross and net NPa ratios were at 2.83 per cent and 0.94 per cent respectively.
Among other things, the level of the NPAs for a card company is affected by "the general level of economic growth in India, the amount of non-performing loans written-off and our credit approval and monitoring policies."
Other factors include a rise in unemployment, prolonged recessionary conditions, decline in household savings and income levels, a sharp and sustained rise in interest rates, etc., it said.

SBI Q3 preview: Profit could take hit due to DHFL, interest income may rise

Despite resolution of Essar Steel, State Bank of India (SBI) may report subdued December quarter (Q3FY20) numbers as analysts expect slippages to rise courtesy Dewan Housing Finance Corp Ltd (DHFL). They, however, expect operating performance in terms of net interest income (NII) to improve during the recently concluded quarter. The bank is slated to report its Q3FY20 earning on Friday, January 31.
At the bourses, the stock has underperformed in the past six months. The stock of the lender has slipped 3.4 per cent during the period under review, as compared to a rise of 10 per cent in the benchmark S&P BSE Sensex. The S&P BSE Bankex index, too, has gained 8.2 per cent during the period.

In the corresponding quarter of the previous fiscal (Q3FY19), India’s largest public sector lender clocked a net profit of Rs 3,955 crore. The same stood at Rs 3,012 crore in the September quarter of FY20 (Q2FY20). The NII, meanwhile, was Rs 22,691 crore and Rs 24,600 crore in Q3FY19 and Q2FY20, respectively.
Here is what leading brokerages expect from the bank’s Q3FY20 earnings:
Emkay Global
According to the analysts at the firm, the state-owned bank is likely to report “muted growth, which coupled with Marginal Cost of Funds based Lending Rate (MCLR), cut should have some impact on net interest margin (NIM)”.
“Provisions could be elevated in Q3FY20 due to pending non-performing assets’ (NPA) provisions of Rs 4,650 crore for FY19, along with accelerated provisions on DHFL, along with slip in other large accounts including Suzlon (NFB), CG Power, and ADAG NBFC group,” they wrote in an earnings preview note.
They peg the net interest income at Rs 25,625.8 crore, a growth of 13 per cent year-on-year (YoY), and 4.2 per cent sequentially. Further, NIM is seen improving by 20 basis points (bps) YoY, and 6 bps QoQ, at 3 per cent.
Motilal Oswal Financial Services
“SBI is well poised for an earnings recovery, led by its steady operating performance at the pre-provisioning operating profit (PPoP) level, recoveries from large NCLT resolutions, and normalisation in credit cost to 1.3 per cent/1.1 per cent in FY21/22,” analysts at the brokerage firm said.
Analysts at MOFS estimate the PPoP to come in at Rs 15,468.6 crore, up 22.5 per cent YoY, but down 15 per cent sequentially. Besides, the net profit is seen jumping over 80 per cent to Rs 7,198.2 crore, as against the net profit logged in the December quarter of FY19.
They project the bank to recover (write-back provisions) Rs 12,000 crore from the resolution of Essar Steel; Rs 800 crore from Ruchi Soya, Rs 4,000 crore from Bhushan Power; and Rs 1,900 crore from Prayagraj.
Prabhudas Lilladher
“SBI has a strong provision coverage ratio (PCR) of 63 per cent (81 per cent including technical write-off) which could touch 70 per cent by FY21 end, putting the bank in strong position on asset quality. Slippages are also trending down except a few unpredictable cases, while recovery/upgrades will see strong traction bring down overall credit cost from 200 bps of loans to 120-130 bps of loans in FY21 end,” they said in an earnings expectation note.
For Q3FY20, the brokerage expects the bank to report a loan growth of 9 per cent YoY and 4 per cent QoQ at Rs 22.32 lakh crore. Credit cost, meanwhile, is seen at 1.46 per cent. On the downside, they estimate the net profit to fall by 24 per cent YoY to Rs 3,004.3 crore, and by 0.2 per cent sequentially.
Edelweiss Securities
Analysts at Edelweiss expect divergence and provisions from DHFL to off-set the recoveries from the resolution of the Essar Steel account. They see the net profit rising 41 per cent YoY and 85.2 per cent QoQ to Rs 5,577.8 crore. “Commentary on the anticipated second wave of stress will be watched out for given SBI's dominant exposure to some of these names,” they said.
ICICI Securities
Analysts at ICICI Securities, too, expect the bank to make a substantial provision for future delinquency and for DHFL using the recovery from Essar.
“Accordingly we park almost 80 per cent of the provisions as general provisions. Slippages will likely include HFC exposure of Rs 10,000 crore leading to total slippages of Rs 18,000 crore,” they wrote in an earnings preview note.
They added: Resolution of Essar is seen to offset slippages from DHFL leading to decline in gross NPA and net NPA ratio by 16 bps and 3 bps, respectively to 7.03 per cent and 2.76 per cent.
They peg the net profit at Rs 7,787.5 crore, a jump of whooping 97 per cent YoY and 158.6 per cent QoQ.

SBI to float $2-bn distressed asset fund; to bring in global partners

The country’s largest lender, State Bank of India (SBI), plans to float a distressed asset fund in the new year and will be roping in a global partner to raise money from international investors. Rajnish Kumar, chairman, SBI, told Business Standard: “We are expanding our fund management business.
At present, SBICAP Ventures, a fund management arm of the group, is managing a realty fund. It is looking at a distressed asset fund too.” SBICAP Ventures is creating capabilities to manage the fund, he said. The size of the distressed asset fund is expected to be ...

SBI chief nudges industry to borrow and invest, says no dearth of fund

SBIChairman Rajnish Kumar on Saturday nudged the industry to enrich their borrowing capacity so as to boost investment in the economy, asserting there is no dearth of funds and most of the banks will be in a better position by March-end as far as stressed assets and non-performing loans were concerned.
He also said that the State Bank of India (SBI) is underutilising its loan sanction limits as there is not enough credit demand from the industry.
"If India has to achieve its goal of USD 5 trillion economy then it cannot happen unless there is investment in the economy. Today the outstanding banking credit is Rs 96 lakh crore. So for a USD 5 trillion economy, we would at least need to double it," Kumar said at the 92nd Annual Convention of industry body FICCI here.
He further said that it is a very good business opportunity for the banks.
The gross capital formation rate which is at about 30 per cent at present also needs to go up to at least 37-38 per cent, Kumar added.
Stressing that there is an adequate availability of funds with the banking system, Kumar said: "I don't find enough projects where investment is being sought. Our first indication is that we are the largest financier of projects, we have a very big team for project finance and currently it is under-utilised."
He said even if there are projects, those are mainly in solar, city gas projects and to some extent in roads sector.
"Last year, we did only two financial closures which can be said to be large tickets. One was HPCL refinery in Rajasthan where the project size is almost Rs 50,000 crore and the other was Mumbai Nagpur Super Communication Expressway where the project size is again Rs 50,000 crore and half of the money has come from the bankers.
"Other than that, I don't have a project where funding demand is more than Rs 2,000 to Rs 2,500 crore today. So I want to ask you (industry), where are the projects? And if there are no projects then how do I lend and to whom I lend?," Kumar asked the industrialists present at the convention.
The State Bank today has loan sanction limits of up to Rs 8 lakh crore, but the utilisation (demand) is of only Rs 5.5-6 lakh crore, the SBI chairman said.
He further said the industry keeps on complaining that banks are not lending and lenders are saying that "we are ready with funds, you are not borrowing".
On the Centre's infra development push, Kumar said, "When we talk about USD 1.5 trillion to be invested in infrastructure sector, there is an opportunity for everyone. I don't think government can meet more than 25 per cent of this requirement. So 75 per cent will still be an opportunity for investors as well as the banks and the foreign capital."

On NPAs and liquidity situation, he said banks now have become extra cautious in lending than they used to be earlier and the risks have increased due to defaults.
Talking about reforms such as IBC (Insolvency and Bankruptcy Code), Kumar said in the current scenario there is ample liquidity available and the recent judgement by the Supreme Court on Essar Steel will matter a lot.
"Many large ticket stressed assets are getting resolved and by March 31, we are going to be in a very good position as far as most of the banks are concerned where at least the NPA (non-performing asset) ratio and stressed assets hopefully will come down," he said.
"And in such scenario, the opportunities which we (SBI) are seeing definitely is infrastructure, consumer lending... There is apparently a demand slowdown, but still our housing loan portfolio, which is a large portfolio, (in that) we are still growing at 16 per cent," the SBI chief claimed.
Among others, unsecured loans (such as credit against salaries) are growing at 25 per cent and there is good demand from housing sector also, he said.
"For housing sector, geographies may differ, you may have problem in NCR but it is not all India problem. We may have some problem in some residential markets but office market is doing quite well in certain cites like Hyderabad, Bengaluru, Chennai, Pune, Mumbai, Navi Mumbai -- all these markets are doing well and we have seen huge investment interest from all the private equity investors," he added.
Replying to a question on lending to the telecom sector in the next round of spectrum auctions, he said, "For us lending for spectrum is completely unsecured. On paper, it is secured as the auction is to be done by government but practically it is totally unsecured."
"So in such circumstances, banks will have to evaluate carefully before lending to the sector as the probability of default is very high," Kumar said.
Nevertheless, at a time when India is witnessing a demand slowdown from consumers and slowdown in economic growth, he said the scenario is not "all that gloomy" as it looks like to be as the country is undergoing a transition phase due to ongoing reforms process.
Also "the mindset with which people do business, the way we live our lives, everything is undergoing a transition phase. I think we are undergoing through a pain due to this transition...the country is full of opportunities. That have not disappeared. So I think we should not be disheartened by the current scenario," Kumar said.

Deposit rate cut beyond a point is risky, India lacks safety net: SBI chief

SBIChairman Rajnish Kumar on Saturday said banks cannot go beyond a threshold to bring down interest rates on deposits as India lacks social security schemes and likewise cannot lend at lower rates to corporates as the risk of default is too high.
On rate transmission by banks, Kumar said when interest rate moves downwards then everybody starts talking and when it goes upwards nobody talks about it.

When the repo rates were going up five-six years back, interest rates for borrowers did not increase in that proportion, he said.
In 2013, the repo rate was around 10 per cent, the SBI Chairman said adding that since 2013, Reserve Bank's repo and bank interest rates for consumers have been moving in a completely aligned manner.
"Secondly, we have repeatedly mentioned that banking system's dependence ...in India is largely on depositors. Today, 90 per cent of my deposit is retail deposit. If I want to lend money cheap, obviously I will have to pay less to depositors; and in a country like ours where there is huge population of senior citizens and in the absence of social security schemes, the interest on deposits is a source of earning," Kumar said while speaking at the 92nd Ficci Annual Convention here on the theme 'making financial system robust to aspire a $5 trillion economy'.
At present, banks largely offer 3 to 4 per cent interest on deposits in savings accounts, and charge borrowers 8 per cent and above rate on loans.
On getting competition from government saving schemes, he said such instruments do not impact the banks much as they still command huge share in the deposit market.
"We can't lower the interest rates (on lending) without lowering the interest rates for depositors. And there is a point, a threshold below which we cannot reduce the interest rate for depositors. Third thing is that the credit cost in the country is very high because the default rates are very high, so the spread has to be necessarily high," said the head of the country's largest lender.
The loss due to defaults is very high currently and in such a scenario the spreads have to be necessarily high to cover for the credit costs, Kumar added.

SBI under-reported bad loans by Rs 11,932 crore in FY19: RBI report

Public sector lender State Bank of India (SBI) under-reported its non-performing assets for the fiscal year FY19, a risk-assessment report of the Reserve Bank of India has found. In a regulatory filing on Tuesday, the bank said it had under-reported its bad debts by Rs 11,932 crore.
The divergence in gross non-performing assets (NPAs) assessed by the central bank for SBI was Rs 11,932 crore in FY19. Similarly, the divergence assessed by the RBI in net NPAs was Rs 11,932 crore for FY19.

Also, the RBI found that SBI had made less provisions for its bad loans in FY19. The divergence found in provisions for bad loans in FY19 was to the tune of Rs 12,036 crore.
Based on the divergence assessed by the RBI in provisioning for bad loans, SBI said it would have reported a net loss of Rs 6,968 crore in FY19 as opposed to a profit of Rs 862 crore.
The bank said, it reported gross non-performing assets to the Rs 1.72 trillion and according to RBI’s assessment; the bank had gross NPAs of Rs 1.84 trillion. Similarly, it reported a net NPA of Rs 65,895 crore but RBI’s assessment showed its net NPAs are 77,827 crore.
And, provisions made by the bank in FY19 was Rs 1.06 trillion but it was needed to provide Rs 1.18 trillion.
SBI also said post the divergence assessed by the RBI in its bad loan book, the net impact on the gross NPAs in Q3 FY20 will be Rs 3,143 crore and on the net NPAs will be Rs 687 crore.
Also, the bank will have to make extra provisions to the tune of Rs 4,654 crore in Q3FY20 .
Recently, the market regulator made it mandatory for listed banks to disclose bad loan divergence within a day of receiving the risk assessment report from the RBI.
Despite the divergence reported, the stock of the bank is marginally down. It was trading at Rs 316.10, down 0.21 per cent.

Electoral bonds: FinMin knew serial number could reveal donor's identity

The finance ministry was initially reluctant to put up serial numbers on electoral bonds, saying they had the potential to reveal the identity of the donors, but agreed later on, after concerns were raised by State Bank of India (SBI).
After being entrusted with the task of issuing electoral bonds, SBI had raised certain concerns with the finance ministry, according to official documents accessed through the Right to Information (RTI) Act by activists Commodore Lokesh Batra (retired) and Anjali Bhardwaj.

This was after the Union government issued the framework for electoral bonds, a financial instrument for making anonymous donations to political parties, on January 2, 2018.
In a letter dated January 19, 2018, SBI said that though the bonds will not carry the name of the buyer they “will necessarily need a serial number” as it will leave no audit trail for internal control and reconciliation and identifying the genuineness of the electoral bonds will become difficult at the branch level.
To this, the finance ministry drafted a clarification saying “putting a serial number would establish a link between the donor and the political party. This could discourage them to use such bonds. Hence, SBI may think of other security features, including holograms, to establish the genuineness of electoral bonds.”
It further added that in case this was not possible, a QR code or a “number with invisible ink” could be thought of. However, the finance ministry agreed to dilute its stance after the SBI held a meeting with state-owned Security Printing & Minting Corporation of India (SPMCIL), which has been authorised to print the electoral bonds, on 6 February.
Reversing its position, the finance ministry said in a response to SBI on February 9, 2018 that the “issues raised by SBI are valid and a bond not having any unique serial number will create a lot of operational difficulties for the bank and will also bring a lot of risks on the bank.” It allowed the bank to put the serial number “to avoid these complications”, advising it to keep information “highly confidential.”
The first issue of the electoral bonds took place in March 2018. In April, news portal The Quint reported that these bonds have “a secret alphanumeric code” which was visible under UV light. This was, according to an agreement between SBI and SPMCIL in its February meeting following which the finance ministry had changed its stance on the serial number.
After media reports on a secret unique number on electoral bonds, a finance ministry official prepared an unsigned handwritten note – part of the official records – in April 2018, which said “we had not prescribed detail features. We had refused for any unique number. SBI had asked for it.”
Interestingly, in 2017, when the government was in talks with the Reserve Bank of India (RBI) to give the regulator the mandate to issue electoral bonds, the latter had also proposed a unique identifier for these bonds. RBI Governor Urjit Patel had written to then Finance Minister Arun Jaitley on September 14, 2017 conveying various objections it had on the proposed electoral bond scheme. He said in the letter that the RBI can take forward electoral bonds on certain conditions, including a unique identifier and “an additional security feature based ID.”
The RBI wanted to be the only authority to issue electoral bonds, through electronic means (Demat), and had raised objections to an enabling provision proposed by the government to authorise other banks to issue such bonds. However, after heated exchanges between the RBI and the finance ministry on the issue from August to September 2017, the RBI’s committee of the central board observed in a meeting on October 11, 2017 “that if the government decides to issue electoral bonds in scrip form through SBI, the Bank (RBI) should let it be.”
The finance ministry had objected to issuing electoral bonds in demat form, as per the RBI proposal, as it felt that the “information of donor” with the regulator may raise apprehensions and make the scheme a “non-starter.”
The ministry, then decided to hand over the task of issuing electoral bonds to SBI after a meeting was held with its chairman Rajnish Kumar on 26 October in which he observed that “even if the electoral bond is issued as a paper bearer bond without the name of the payee, SBI would know who the donor was and would be able to link him with the payee election party when bond comes for encashment.” “Hence, SBI will need to be insulated by suitable legal provisions if it is not expected to share the information with entities such as tax authorities, enforcement directorate, police in case of criminal matter, etc,” as per the record of discussions.
Even as the finance ministry declined a request from the RBI to go for demat version of the electoral bonds, in its meeting with the SBI Chairman in October, finance ministry joint secretary (budget) Prashant Goyal noted how the bank was willing to go for digital applications. “With some advance note, SBI could plan a demat version of the electoral bonds,” the records showed.
What political parties told the finance ministry during consultation on electoral bonds:
BJP
Electoral bonds a decisive step towards corruption-free India; it should be issued without any serial number or identification mark to ensure secrecy
Congress
It is non-transparent as the identity of the donor and the political party to which funds are donated will only be known to the government and not general public
Shiromani Akali Dal
Electoral bonds are a landmark step towards transparency in political funding. Allow only profit-making companies to donate through it.
BSP
Will be able to offer comment if we receive a draft proposal of the scheme
CPI
The present method of political funding is more transparent than the secretive amendments being introduced

SBI made many poor commercial decisions in the past decade: MD Arijit Basu

Largest lender SBI does not "mind" its lower stock valuation compared to a leaner private sector players due to state ownership and social sector focus, but admitted that it needs to improve on commercial decisions.
Speaking at an event organised by former Sebi chief M Damodaran here on Thursday, Arijit Basu, a managing director at SBI, also conceded that the bank has erred on some business decisions and cannot attribute those to social compulsions.

SBI's market capitalisation on Friday stood at a low Rs 2.95 lakh crore, which is just about 42 percent of private sector HDFC Bank's Rs 7.02 lakh crore, while SBI's loan-book is Rs 22.48 lakh crore, and the same for HDFC Bank is under Rs 9 lakh crore.
"If our market cap is slightly lower...we do not mind that. We are absolutely fine with that," Basu said and partly blamed it on government ownership, which plays an important part in the market's calls on valuations and asserted that the bank is proud of its work on the social uplift front and infrastructure building because of the state ownership.
But he was quick to add that SBI is a "commercial organisation with a difference...we have to start with the premise that certain objectives of the government of the day and for the society at large, cannot be done away with," he said, adding organisations like SBI exist because of the societal challenges.
He, however, conceded that some commercial decisions taken by the bank in the past decade have been wrong and it cannot blame the social sector mandates for such decisions.
"On the commercial part, as a bank we feel that there is scope to improve. While there have been ecosystem problems, we would be foolish to state that in the last 10 years, we have not made mistakes in our business itself as those were taken with no social compulsion at all," he added.
Basu said there are also some benefits of the societal outlook of SBI, saying it helps it access low cost deposits, and that the market rewards the bank when it does good commercially like the recent spike in valuations after a favourable judgement in the Essar Steel case.

SBI pre-tax profit sees three-fold jump to Rs 5,060 crore, beats estimates

State Bank of India (SBI), the country’s largest public-sector bank, reported a strong set of numbers for the quarter ended September 30 (Q2), with its profit before tax (PBT) surging 179 per cent to Rs 5,060 crore compared to Rs 1,812 crore in the year-ago quarter on a standalone basis.
The strong showing was backed by a 46 per cent reduction in slippages (loans turning bad) and a 21 basis points (bps) rise in the net interest margin, a profitability indicator, as compared to the June quarter. These parameters were also better on a year-on-year (y-o-y) basis.

Net profit stood at Rs 3,012 crore, as against Rs 945 crore for Q2FY19. This was a y-o-y increase of 219 per cent, and was significantly ahead of the Bloomberg consensus estimate of Rs 2,411 crore. Faster growth in net profit was helped by the 4.1 per cent stake sale in its listed subsidiary, SBI Life Insurance, which got an exceptional income of Rs 3,484 crore for the bank.
In the year-ago period, exceptional income stood at Rs 1,561 crore. Commenting on the performance, SBI chief Rajnish Kumar said, “If I use the word the ‘safest’ bank of India’, I will not be exaggerating.”
“We are creating resilience to absorb the shocks of the market through the strength of our balance sheet,” he added.
SBI’s shares gained 7.26 per cent to close at Rs 281.55 on the BSE on Friday. The bank has not moved to the new tax regime yet, which will require it to set off the deferred tax assets (DTA). SBI is likely to move to the new regime (corporate tax rate of 25 per cent) by March 2020.
Net interest income (NII), the difference between interest earned and interest expended, increased to Rs 24,600 crore in Q2 from Rs 20,906 crore a year ago, an increase of 17.7 per cent.
Net interest margin (NIM) improved by 42 basis points (bps) and stood at 3.22 per cent, compared to 2.80 per cent in the year-ago quarter.
graph
Domestic credit growth at 8.43 per cent YoY was mainly driven by retail advances, which surged 18.9 per cent, in Q2FY20. Even in the non-festive season, the retail book saw a strong traction, especially the home loan segment. Auto loans grew at 5.6 per cent YoY and the other personal loan segment recorded robust growth of 26.9 per cent. Deposits grew by 8 per cent to Rs 30.33 trillion. The share of low-cost current account and savings account (CASA) was steady on a sequential basis at 45.13 per cent with the bank sitting on excess liquidity.
The gross non-performing asset (NPA) ratio was down 276 bps YoY, and 34 bps sequentially at 7.19 per cent. The net NPA ratio, too, at 2.79 per cent was down 205 bps YoY, and 28 bps sequentially. Slippages fell 46 per cent for Q2FY20 to Rs 8,805 crore against Rs 16,212 crore in Q1. Slippages were also lower as compared to Rs 10,725 crore in the year-ago quarter.
Kumar said: “Gross slippages will not slip below 2 per cent (as a percentage of loan book) for the year in the worst-case scenario. We have divested 4.5 per cent in SBI Life and made a Rs 3,500-crore gain to the bank. We have upfront adjusted it against some NPAs of a failed restructuring power asset and fully covered its Rs 2,600 crore and have also provided for one NBFC account, which is Rs 900 crore.”
He added NPAs coming from the agriculture sector were due to loan waivers and would not move up in the coming quarters.
Overall, the provisioning coverage (PCR) ratio increased from 79.34 per cent in June quarter and 70.74 per cent in the year-ago period to 81.23 per cent in Q2FY20, the highest ever. Accounts under List 1 and List 2 have been provided to the extent of about 89 per cent. The combined SMA1 and SMA2 (watch list) stands at Rs 9,312 crore from Rs 10,289 crore in Q1FY20.
On recoveries, Kumar said, “By November 15, the bank is expecting a final judgement on Essar Steel and some other cases and is expecting a recovery of Rs 17,000 crore, which is over and above the normal recovery for the coming quarter.” “Bad loans seem to be under control for the time being,” said Siddharth Purohit, a banking analyst at SMC Global Securities.

IAG to sell stake in SBI General Insurance to Premji Invest, Warburg Pincus

Public sector lender SBI on Thursday said its joint venture partner IAG will sell entire 26 per cent stake in its subsidiary SBI General Insurance to Napean Opportunities and WP Honey Wheat lnvestment Ltd for an undisclosed amount.
"IAG has entered into definitive agreements to sell the whole of its 26 per cent interest in SBI General via two transactions," State Bank of India said in a regulatory filing.

The country's largest lender and lnsurance Australia Group (IAG) currently own 70 per cent and 26 per cent, respectively, in SBI General Insurance.
"The agreements have been reached with Napean Opportunities LLP (an affiliate of Premji lnvest) to acquire a 16.01 per cent interest and WP Honey Wheat lnvestment Ltd (Warburg Pincus Group) to acquire a 9.99 per cent interest," SBI said.
The transactions are subject to regulatory processes and approvals.
SBI General, valued at over Rs 12,000 crore recently, is a joint venture between SBI and Insurance Australia Group.
Last month, SBI Chairman Rajnish Kumar has said the bank has dropped its plan to take its general insurance arm public as there is no need for additional capital now.
Shares of were trading 0.70 per cent higher at Rs 257.70 apiece on the BSE.
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

SBI Life hits new high on strong Q2 results, rallies 10% in two days

Shares of SBI Life Insurance extended their rally for the second straight day and hit a new high of Rs 928, up 6 per cent on the BSE on Thursday, after the company reported strong earnings in July-September quarter (Q2FY20). The stock of the life insurance company, which has surged 10 per cent in the past two days, was trading at its highest level since listing on October 2017.
SBI Life reported strong growth of 33.3 per cent year on year (YoY) and 17.5 per cent YoY in gross written premium (GWP) and new business annualized premium equivalent (APE), respectively in Q2FY20, led by focus on protection, annuity and individual non-par savings business. Renewals registered 33.2 per cent growth YoY.

“Value of new business (VNB) margin on effective-tax expanded by 100 bps YoY to 20.2 per cent in H1FY20 on a 400 bps positive variance from a change in product mix, neutral effect of change in assumptions (as will be reviewed by year-end) and 300 bps negative impact due to falling interest rates,” Emkay Global Financial Services said in a client note.
“The management has maintained its focus on profitable growth by optimizing the product mix to capture the growth opportunities at the same time, gradually improving profitability. Annuities and Protection (albeit Return of Premium being the majority in individual protection) will continue to lift up VNB margins,” analysts at SBICAP Securities said in result review note.
On the distribution front, the agency channel has started to deliver good results. This coupled with strong and continuously improving banca will enable SBI Life deliver impressive growth – certainly higher than that of the private life insurance industry – despite volatile economic and financial market conditions, it added.
Meanwhile, Australia's IAG plans to sell its 26 per cent stake in SBI General Insurance to Premji Invest and Warburg Pincus, reports suggest. SBI General is a joint venture between State Bank of India (SBI) and Insurance Australia Group (IAG). SBI and IAG currently own 70 per cent and 26 per cent stake, respectively in SBI General Insurance. READ MORE HERE
At 10:56 am, SBI Life was trading 5 per cent higher at Rs 920 on the BSE, as against a 0.21 per cent rise in the Sensex. A combined 1.8 million equity shares have changed hands on the counter on the NSE and BSE so far. In the past six months, the stock has rallied 51 per cent, as compared to a per cent decline in the S&P BSE Sensex.

SBI revises interest rates on loans, FDs, savings deposits: check new rates

The State Bank of India (SBI) on Wednesday made several announcements with regards to interest rates. While borrowers stand to benefit from the new rates announced, some savings account holders will receive lower interest payment on their deposits from November 1, 2019. The bank has also cut interest rates on fixed deposits or FDs, its second revision in a month.
Revised FD rates

SBI has lowered FD rates by 10 basis points for ‘1 year to less than 2 years’ maturity with effect from October 10, 2019.
Revised SBI FD (below Rs 2 crore) interest rates with effect from October 10:
ChartRevised SBI fixed deposit rates (below Rs 2 crore)
Revised SBI FD (Rs 2 crore and above) interest rates with effect from October 10:
ChartRevised SBI fixed deposit rates (Rs 2 crore and above)
Revised interest rates on savings account deposit
State Bank of India has announced revision in interest rate on Savings Bank Deposits (with balances up to Rs 1 lakh) from 3.50 per cent to 3.25 per cent, with effect from October 10, 2019.
The interest rates on savings account deposits above Rs 1 lakh has been kept unchanged.
Interest rates on non-repo-linked loans cut by 10 bps
SBI has announced a reduction in its marginal cost of fund based lending (MCLR) rate by 10 basis points across all tenors, effective October 10.
With this reduction, the one year MCLR, to which all the lending rates are linked to, is set at 8.05 per cent as against 8.15 per cent earlier.
The decision will benefit customers who have taken MCLR-based home loan from the bank. However, EMIs many not come down immediately as such loans have a one-year reset clause.

SBI chairman pitches for stimulus, says credit demand remains subdued

State Bank of India (SBI) Chairman Rajnish Kumar on Sunday said credit demand remains subdued and there is a need for stimulus in the economy.
Though lack of credit demand exists in the economy, there is no supply-side constraint as the public sector banks are more or less well-capitalised, he said.

"Demand for credit in the economy is subdued. There is a need for stimulus in the economy", Kumar told reporters here.
He was in Kolkata to attend the multi-level consultation programme with the branch managers of SBI in the region.
"There is no supply-side constraint. More or less, the public sector banks are well-capitalised and bank rates also moderated," he said.
Kumar hoped that monsoon will have a positive impact.
Increased spending by the government and the upcoming festival season would boost demand, Kumar added.

SBI Life extends rally on strong June quarter earnings

Shares of SBI Life Insurance Company were trading 3 per cent higher at Rs 838 per share on the BSE on Friday, extending a 5 per cent rally seen on Wednesday, in an otherwise weak market on expectations of strong growth outlook. The stock was trading at its highest level since it got listed at the exchanges on October 3, 2017. During the past six months, it has rallied 48 per cent, as compared to a 5 per cent rise in the S&P BSE Sensex.
SBI Life reported a strong set of results in the April-June quarter (Q1FY20), with 49 per cent year-on-year (YoY) growth in new business value (NBV). The Annualized Premium Equivalent (APE) grew 41 per cent YoY, and margins improved 90 basis points (bps) YoY to 17.9 per cent, on improved protection mix.

The numbers in the recently concluded quarter beat analysts' estimates.
For FY20, analysts at JP Morgan expect a NBV growth of 41 per cent YoY, to Rs 2,420 crore, leading to EV growth of 18 per cent YoY, to Rs 26,400 crore. Further, lower bond yields and potentially positive operating variance with improving persistency could provide favorable results.
The brokerage firm sees strong demand for the stock among emerging market investors on the back of strong growth, which it says, is exceeding most Asia’s life companies’.
"The share overhang risk from promoter stake sale persists, but fundamentals remain solid, it added. The brokerage firm has ‘overweight’ rating on the stock with March 2020 target price of Rs 1,000 per share.
“Given the strong distribution footprint of its parent SBI (24k+ branches), improving protection share (1QFY20: 11.2 per cent), lowest operating cost ratios (11.2 per cent), improving margins (VNBM: 19.9 per cent) and tailwinds from financialisation of savings we expect SBI Life to deliver strong FY19-22E VNB CAGR of 19.8 per cent p.a. and RoEVs of around 17.5,” analysts at HDFC Securities said in result review with ‘buy’ rating on the stock and target price of Rs 914 per share.
At 10:47 am, SBI Life Insurance was trading 2.7 per cent higher at Rs 834 on the BSE, as compared to a 0.3 per cent decline in the S&P BSE Sensex. A combined 7,05,253 shares have changed hands on the counter on the NSE and BSE so far.

SBI most hit as eight of top-10 firms lose Rs 90,000 cr in m-cap

Eight of the 10 most valued Indian companies suffered a combined erosion of Rs 89,535 crore in market valuation last week, with SBI emerging as the biggest drag.
In the top-10 list, only Tata Consultancy Services (TCS) and HUL saw gains in their market capitalisation (m-cap) for the week ended Friday.

Reliance Industries Ltd (RIL), HDFC Bank, HDFC, Infosys, ITC, Kotak Mahindra Bank, SBI and ICICI Bank closed the week with losses.
The valuation of SBI tumbled Rs 30,388.3 crore to Rs 2,75,279.64 crore.
RIL's m-cap plummeted Rs 18,952.5 crore to Rs 7,50,674.86 crore and that of HDFC Bank plunged Rs 16,774.8 crore to Rs 6,05,627.15 crore.
The market valuation of HDFC tanked Rs 7,660.34 crore to Rs 3,66,471.19 crore and that of ITC declined Rs 6,995.81 crore to Rs 3,24,753.23 crore.
Infosys' market cap eroded by Rs 5,111.1 crore to reach Rs 3,33,037.59 crore and that of ICICI Bank went lower by Rs 3,003.03 crore to Rs 2,65,122.36 crore.
The valuation of Kotak Mahindra Bank fell by Rs 649.22 crore to Rs 2,87,873.18 crore.
In contrast, the m-cap of TCS zoomed Rs 36,491.94 crore to Rs 8,27,794.83 crore and that of Hindustan Unilever Limited (HUL) jumped by Rs 1,493.71 crore to Rs 3,76,145 crore.
In the ranking of top-10 firms, TCS was at the number one ranking, followed by RIL, HDFC Bank, HUL, HDFC, Infosys, ITC, Kotak Mahindra Bank, SBI and ICICI Bank.
Last week, the Sensex lost 764.57 points or 2.01 per cent.

State Bank of India cuts MCLR by 5 bps, home loans cheaper by 10 bps

State Bank of India (SBI) on Wednesday reduced its MCLR by 5 bps across all tenors and slashed interest rate on home loans up to Rs 30 lakh by 10 basis points.
One-year MCLR will be 8.50% per annum (pa). The interest rates on all loans linked to MCLR stand reduced by 5 bps from April 10, 2019, India’s largest lender said in statement.

Now the applicable interest rate for such housing loans below Rs.30 lacs will range from 8.60% p.a. to 8.90% p.a. Prior to the rate cut decision range for rate was 8.70% p.a. to 9.00% pa.

SBI has linked its Cash Credit /Over Draft rates above Rs one lakh to the repo rate for better transmission of RBI’s policy rates. The benefit of reduction in repo rate by 25 bps by RBI (from April 04 2019) will get passed on in its entirety to CC/OD customers banking with SBI from May 01 2019, it added.
SBI has linked its Savings Bank rates to the repo rate. Thus the saving bank rates shall also stand revised from May 01 2019. For balances up to Rs one lakh rate will be 3.50 per cent p.a., comprising almost 95% of SB account holders.

How SBI customers can withdraw money from an ATM without a debit card

India's largest lender State Bank of India (SBI) on Friday launched YONO Cash with which customers can withdraw money from ATMs without using a card. Bank customers can now generate a one-time pin (OTP) on their mobile application and use the pin to transact from the bank’s ATM.
How it works:

Step 1: Install YONO App on your Android or iPhone
Step 2: When you have to withdraw money from an ATM, put a request on the app, following which you will get a unique 6-digit registration number, which will be valid for 30 minutes.
Step 3: Visit the nearest SBI ATM or YONO Cash points, and use that PIN to withdraw money. The customer will also get a confirmation of the cash withdrawal via SMS.
YONO Cash facility is available across 16,500 SBI ATMs, pan-India. Besides the 6-digit registration number, the user will be also required to enter the YONO App PIN for cash withdrawal. The service can be used by a customer only on one device.
SBI chairman Rajnish Kumar said the new initiative will address concerns over using debit cards at ATMs for cash withdrawals by eliminating the possible associated risks. “This feature on YONO is designed to help its users withdraw cash without a physical debit card," he said in a statement.
Using a mobile application reduces the risk of card-based frauds which arise out of skimming and cloning.
Users can withdraw up to Rs 10,000 per transaction and make two withdrawals a day using the application.