Impact of high overheads and provisioning

State Bank of India closed 2013-14 with a a 22.8 per cent reduction in its annual profit mainly due to high overheads and provisioning.

Arundhati Bhattacharya, Chairman, said the bank had to make a large amount of provisioning on stressed loans and income-tax dented the operating profit which had increased by 36.9 per cent during the quarter and 3.3 per cent during the year.

The net profit stood at Rs.3,041 crore in the fourth quarter ended March 31, 2014, against Rs.3,299 crore in the year ago period, down 7.9 per cent. For the whole of 2013-14, the net profit was Rs.10,891 crore against Rs.14,105 crore in 2012-13.

Net non-performing assets (NPAs) stood at 2.57 per cent against 2.51 per cent year-on-year but declined sequentially. Fresh slippages at Rs.7,949 crore in the fourth quarter, were lower than the third quarter.

Ms. Bhattacharya said that the bank had set up an NPA control cell to ensure better understanding of the entire matter with committees being set up to look at some ‘special mention accounts.’

“Asset quality is after all a function of the way an economy performs,” she said adding that if gross domestic product (GDP) improves boosting demand, it would lead to improved top and bottom lines…. but it would take two quarters to show on a bank’s books.”

It was learnt that iron and steel, textiles and pharmaceuticals were some of the sectors, which accounted for most of the stressed assets.

She said that the bank had shown de-growth in the SME sector by around 2.37 per cent which was mainly due to consolidations being effected. A greater thrust was being placed on recovery and an SME collection wing has been set up with recast of some accounts. An SME pilot has been set up to check stress in SME accounts.

“Retail continues to be a good story,” she said. The bank clocked increases in home loans and auto loans.

Job creation

SBI’s first woman chairman seems to be betting big on the new government.

Pointing out that the new government had put a lot of stress on job creation, she said at the annual SBI meet that jobs could only come from the growth of the manufacturing sector.

“Manufacturing sector has to do well,” she said adding that she also felt that traditional sectors such as textiles would do well. As the U.S. and Europe starts doing well, sectors such as textiles and jewellery will do better although the appreciating rupee is a challenge, according to Ms. Bhattacharya. “I also see infrastructure sector coming back,” she said.

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