SBI to buy bank in Indonesia

State Bank of India (SBI) is planning to buy a second bank in Indonesia. The state-run lender, which had acquired a bank in Indonesia in 2006, has already shortlisted two or three banks. The Indonesian bank will  be bought over through its unit PT Bank SBI Indonesia at a cost of $100 million.

SBI is also planning a second acquisition in Indonesia as the local law doesn't permit setting up new branches in the country. SBI is also setting up a subsidiary in Australia. The bank already has a branch operating in Australia, SBI deputy managing director Pratip Chaudhuri said.

The bank is also planning to open branches in the Netherlands or Italy and also in Botswana.

"We would soon seek regulatory clearance from both the Reserve Bank of India and the Indonesian banking regulator," Mr Chaudhuri added.

On Tuesday, SBI shares ended 4.4% down at Rs3,271 on the Bombay Stock Exchange, while the benchmark Sensex closed 0.4% up to 20,932 points.

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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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