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SBI braces for harsher third quarter

“Going forward in the next quarter we think another Rs500 crore-Rs600 crore would slip into NPAs. So the slippage ratio for these loans too would go up from 14.5% to 17% plus.” – SBI chairman OP Bhatt

State Bank of India (SBI), the country's largest lender, on Monday reported a 22.2% decline in consolidated net profit to Rs2,437.10 crore for the second quarter ended 30 September 2010. The Bank had a net profit of Rs3,133.10 crore in the year-ago period. The profit figures were well below analysts estimates. This was mainly due to increased provisioning for bad loans, the Bank said in a statement.

On a standalone basis, SBI's net profit grew by just 0.4% to Rs2,501.30 crore in the second quarter, against Rs2,490 crore in the year-ago period. Standalone income increased to Rs23,813.30 crore in the quarter under review from Rs21,301 crore, a growth of 11.7%.

According to BRICS Securities, pension/gratuity liability and costs related to a higher employee base pressured the bottom line, but the major disappointment was due to higher provision expenses towards higher non-performing assets (NPAs) and meeting the 70% threshold set by the Reserve Bank of India (RBI).

The Bank said that it had increased provisions for NPAs by 96% to Rs2,160.50 crore. The provision ratio widened to 62.78% as of 30th September from 60.70% as of 30th June. The RBI in October 2009 said banks would have to increase the minimum provision ratio to 70% from 10%.

NPA provisions were up 116% year-on-year (y-o-y) to Rs2,162.50 crore and the bank provided Rs300 crore towards provision for gratuity. It has provided an excess provision of Rs449 crore to increase its provision coverage ratio. The resulting provision coverage has improved by 320 basis points sequentially to 50%. After including technical write-offs, the provision coverage stands at 62.78% which, though better than the previous quarter, is still below the 70% level. Sharekhan wrote in its review of the result that considering the extension of the deadline to March 2011, the Bank should be able to reach the stipulated level of 70%.

Gross non-performing assets have increased by 11.4% quarter-on-quarter (q-o-q) to Rs23,205 crore. The gross slippages during the quarter were high at Rs4,412 crore. Out of these, Rs661 crore are from restructured assets. Of the restructured assets, about 14.5% have slipped into the NPA category with incremental slippages primarily from the mid-corporate segment.

SBI's total income, however, increased by 14.6% to Rs37,925.40 crore in the July-September quarter from Rs33,101.6 crore in the corresponding previous quarter. The Bank posted a net profit after minority interest of Rs2,363.90 crore in the period, compared to Rs3,050.90 crore in the corresponding period last year.

In Q2FY2011, SBI's loans grew by a strong 19.5% y-o-y to Rs6,93,224 crore, while deposits grew at a slower pace of 10.7% y-o-y. The current account and savings account (CASA) ratio improved by 28 basis points q-o-q to 47.79%.

SBI's capital adequacy ratio (CAR) stood at 13.20% as on 30 September 2010 with the tier-I capital adequacy at 9.6%.

"Short-term interest rate analysis is a function of demand for credit and liquidity. Liquidity is tight in the market and the RBI has decided that they have slightly tighter liquidity policy," SBI chairman O P Bhatt said after announcing second quarter results. "Going forward in the next quarter we think another Rs500 crore-Rs600 crore would slip into NPAs. So the slippage ratio for these loans too would go up from 14.50% to 17% plus.

(This article is based on secondary research. The report is for information only. None of the stock information, data and company information presented herein constitutes a recommendation or solicitation of any offer to buy or sell any securities. Investors must do their own research and due diligence before acting on any security).

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Mig33 raises $8.9 million to expand in India

Mobile social network Mig33 has raised $8.9 million in Series C funding led by Indonesian telecom entrepreneur Sugiono Wiyono Sugialam and Japanese social networking firm Gree Inc. Mig33 was also supported by existing investors Accel Partners, Redpoint Ventures and DCM.

In May 2007, Accel Partners and Redpoint first invested $10 million in Mig33. In January 2008, Mig33 closed a $13.5 million round led by DCM and joined by Accel and Redpoint. With this Series C round, Mig33's total funding so far rises to $34 million. The Singapore-headquartered service now has 40 million members and reaches 200 countries.

The funding will be used to expand its service in more emerging markets such as South Africa and India and will also use it to develop its monetisation channel.
 

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Dhanlaxmi Bank’s jittery financials are a concern

The sustained decline in profitability of the bank, coupled with the additional impact of further provisioning on its books is of grave concern for shareholders

Kerala-based Dhanlaxmi Bank is treading on choppy terrain these days, if its financials are anything to go by. The lender's bottom-line has been taking a hit for the past five quarters now, and faces some more heat given that it has yet to meet the mandatory provisioning requirement against its loan book.

The recent September quarter results have failed to provide much cheer to investors. Despite a healthy growth in the top-line, the bank's profits have been impacted due to staffing and branch expansions. The bank registered a 52% growth in revenues as advances have picked up considerably in this quarter. However, its net profit tanked a massive 74% to Rs1.62 crore from Rs6.26 crore in the corresponding quarter last year. Operating profit growth was muted at 9%, although entering positive territory after a long time.

Its performance over the past five quarters indicates that the bank finds itself in a sticky situation. Although average growth in revenues is fairly sound at 36%, the company's operating performance has averaged -39% over the past five quarters. On an average, net profits have declined 62% over this period.

The bank's net interest margin (NIM) has remained at around 2.4% over the past five quarters, which is much lower compared to some of its peers in the banking industry. On the asset performance side, the bank has gross non-performing assets (NPAs) at around 1.25% of its loan book while net NPAs stand at around 0.7%. However, the bank's loan-loss provisioning coverage at the end of September stood at only 46%. This is a long way from the mandatory provisioning requirement of 70% fixed by the Reserve Bank of India (RBI). This means that the bank will have to endure more stress on its profitability as it makes more provisioning in the coming quarters to address this deficit.

Recently, the bank announced the acquisition of 15% stake in financial services provider Destimoney Securities. This acquisition cost the bank around Rs13 crore. Destimoney Securities is a 100% subsidiary of Destimoney Enterprises, a financial services provider and advisory company owned and controlled by private equity firm New Silk Route.

According to bank officials, the primary reason behind this investment was to offer its retail customers access to online broking services through the bank. Although it could help the bank generate more current account, savings account (CASA) deposits, the investment is a costly affair at a time when the bank is experiencing more than just a pinch on its financial statement.

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COMMENTS

TARUNDAS

6 years ago

Yesterday a press meet was held at the 'trichur press club' in trichur where the so-called corporate office of the'dhan ' bank is situated .The media persons of the club were addressed by Mr.k.Ananthkumar,Vice President & a few other office bearers of the ''All India Bank Officers' Confederation'to inform about the precarious position of the bank.As one who attended these are the main allegations:
1) Though the financials of the bank are weak -the dividend for the investors has IMPROVED FROM 10 % TO 5 % ! --the new management makes investments to simply divert media attention while announcing POOR financial results - 15% stake in financial services provider Destimoney Securities.
2) The q2 results do not reflect the correct state of affairs of the bank as this little profit of Rs 1.62 crore has been made out of a total debit of Rs 8 crre from ALL SB ACCOUNTS UNDER THE HEAD "CHARGES" which is ultra vires.Hence this debit is reversed if a complaint is raised by a discerning customer .
HAD FULL PROVISION OF 70% MADE AS DIRECTED BY RBI , THE LOSS WOULD HAVE BEEN IN 3 DIGITS AS THE SHORTAGE IS 24 % !!!
3)Even when the financials are weak,they have taken 20000 sq ft ofspace on a prime location from where the top executives of this smallest bank in india with the lowest profitability though the corporate office is in Trichur (where the H.O. of 2 other bigger banks function ) .Further,to fool the public of Trichur they have started to construct a new corporate building( though a bigger bank with excellent profitability has only a 30000 sq ft H.O. !)Of ONE LAC SQ FT building !
4)Mr.Amitab ,the Md&ceo has , out of the total 39.50 lac ESOPS, 36.50 LAC SHARES OF WHICH 10.50 LAC SHARES TAKEN BY HIM ,26.0 LAC SHARES DISTRIBUTED AMONG HIS COHORTS WHO JOINED THE BANK SINCE 2008 ! THE LOYAL OFFICERS OF THE BANK TOGETHER GOT 3 LAC !!!!!

TARUN DAS

6 years ago

Yesterday a press meet was held at the 'trichur press club' in trichur where the so-called corporate office of the'dhan ' bank is situated .The media persons of the club were addressed by Mr.k.Ananthkumar,Vice President & a few other office bearers of the ''All India Bank Officers' Confederation'to inform about the precarious position of the bank and also the agitation they are sarting from 15/11/10 against the mismanagement .As one who attended ,these are the main allegations:
1) Though the financials of the bank are weak -the dividend for the investors has IMPROVED FROM 10 % TO 5 % ! --the new management makes investments to simply divert media attention while announcing POOR financial results - 15% stake in financial services provider Destimoney Securities.
2) The q2 results do not reflect the correct state of affairs of the bank as this little profit of Rs 1.62 crore has been made out of a total debit of Rs 8 crre from ALL SB ACCOUNTS UNDER THE HEAD "CHARGES" which is ultra vires.Hence this debit is reversed if a complaint is raised by a discerning customer .
3)Even when the financials are weak,they have taken 20000 sq ft ofspace on a prime location from where the top executives of this smallest bank in india with the lowest profitability though the corporate office is in Trichur (where the H.O. of 2 other bigger banks function ) .Further,to fool the public of Trichur they have started to construct a new corporate building( though a bigger bank with excellent profitability has only a 30000 sq ft H.O. !)Of ONE LAC SQ FT building !
4)Mr.Amitab ,the Md&ceo has , out of the total 39.50 lac ESOPS, 36.50 LAC SHARES OF WHICH 10.50 LAC SHARES TAKEN BY HIM ,26.0 LAC SHARES DISTRIBUTED AMONG HIS COHORTS WHO JOINED THE BANK SINCE 2008 ! THE LOYAL OFFICERS OF THE BANK TOGETHER GOT 3 LA !!!!!
5) onus denied to eligible offices.
6) HAD npa provision coverage provided FOR , THE LOSS WOULD HVE BEE PEHPS IN 3 DIGITS AS THE SHORTAG IS 24 % !!!

Sony Sajan

6 years ago

I completely agree with bank making losses.but look at the long term story.it is rite nw putting its operations n people rightly bcoz of which pat has taken a hit.the top line nos are awesum.opex going fwd will decline as bank is not planning further branch expansions and employee recruitment.Also we will have to review how good Dhanbank's strategy of getting in secured retail loans work out to be and what is its impact on NIM's.Acc to me its a wait n watch story.bank will show nos post FY11 or mid FY12

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