With its 12,000 branches and 90 million customers,
State Bank of India (SBI) - the country's largest bank - commands about 18 per cent market share in deposits and loans. But that's the bigger picture only.
For the quarter ended March 31,
SBI posted a meager Rs 20.9 crore profit - a whooping 99 per cent
decline over the same quarter last year - the lowest quarterly profit in its corporate history.
Operationally, the quarter was weak, with the bank posting a sharp 54 basis points (100 basis points make a per cent) decline in Net Interest Margin to 307 basis points compared to the previous quarter.
That apart, 7 per cent annual fee growth was too modest for the banking behemoth, which also reported higher than expected asset quality deterioration. On a quarterly basis, non-performing loans were 8 per cent higher.
On the employee benefits' side, SBI's pension provisioning was large and not disclosed earlier. The bank made pension provision of Rs 2,470 crore and gratuity provision of Rs 1,570 crore in FY 2011.
Additionally, the bank has charged pension liability of Rs 7,930 crore directly to the reserves. Analyst fraternity believes this lack of clarity and provisioning is disappointing, since the bank has historical precedence. In FY 2008, SBI had taken Rs 4,300 charge towards employee benefits.
On the strategic side, some of the issues have been building up for some time. The preceding chairman, OP Bhatt, had aggressive ambitions to achieve the market share. And that happened at the cost of margins, which is now evident.
Pratip Chaudhuri, the incumbent chairman, came on board and started with
discontinuing teaser home loans - selling like hot cakes while interest rate were on the rising trend.
Provisioning in the latest quarter includes a one-off provisioning of Rs 500 crore on account of teaser loans.
While this is just the beginning, more such surprises may surface up in the ensuing quarters.
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