“The merger will catapult the bank into the top 50 banks globally and is in furtherance of the bank’s mission statement to be of service in the remotest parts of India. The merger will...
allow the bank to leverage operational synergies, reach out to new clients and improve market share by ensuring a better reach through enlarged presence,” the bank said in a statement on August 20. The merged entity will have a network of more than 24,000 branches, 270,000 employees and total assets of Rs 30,00,000 crore (which will increase by 36 per cent).
India’s second largest bank post the merger will be almost one-fourth of SBI in terms of total deposits and advances.
The statement said that increased presence in all terrains and geographies will increase bank’s deposit raising capacity and bring down the cost of funds further.
“Thus, the benefit so derived will flow on to the customers in the form of improved services, borrowing costs etc,” it said.
“The merger will also lead to faster roll-out of digital initiatives across the Bank post the mergers, which is currently hamstrung by existence of different entities with separate managements causing a lag in implementation across the SBI group,” it said. This is good for the customers of associate banks as well as they will benefit from new initiatives, SBI said. “The reduction in overheads, administrative offices and centralisation of treasury will in itself lead to substantial reduction in operating costs. Post the mergers, the bank will re-deploy manpower in customer facing roles with a sharper marketing focus,” it said. The speed of credit delivery, particularly large credit approvals, will improve as instead of seven sanctions by seven banks, the customer will have to deal with a single credit approval process.
Earlier, SBI, which saw a sharp decline in its slippages in the first quarter, is expecting strong growth in advances to counter pressure on margins.
“Margin depression due to bad loan creation will hopefully reduce,” says SBI’s Chairman Arundhati Bhattacharya. Pressure will also reduce as deposit rates come down along with cost of funds. SBI reported a 31.7 percent dip in net profit to Rs 2,520.96 crore while the net interest income rose 4.2 percent to Rs 14,312.31 crore in Q1.
Speaking on merger with its associate banks, Bhattacharya says the plan is to complete the exercise by end of current fiscal. The benefits of this, however, will be seen over next two years.
Bhattacharya told a financial daily, “There is nothing as first bank or last bank or unlisted or listed bank, it would be one bank after another. All banks would be merged by March 2017. We are working on it.”
Inflation, which was higher in July on back of higher food inflation, is expected to ease a little in August. However, liquidity continues to be good, she says, adding, the Reserve Bank should come close to achieving its 5-percent inflation target for January-March 2017.
Pay hikes as well as festival season could lead to improvement in loan growth for the bank. Bhattacharya also reiterated the slippages guidance of Rs 40,000 crore for FY17. “We are fully in control,” she says, adding, most of the big accounts have already been classified by SBI.
Earlier, the lender directed five associate banks to clean up their books as a prelude to the proposed merger — the move that has led to Rs 2,018 crore combined losses of associate banks in the first quarter ending June this year. Senior officials from the State Bank group told ET that the associate banks were told to align the classification of loans with the parent bank, even if it requires them to take a hit on bottom line. Post-merger, an account can't be classified as standard in the books of one associate bank and sub-standard for another associate bank or parent bank," said a bank official.
In May this year, SBI announced merger of State Bank of Patiala, State Bank of Mysore, State Bank of Travancore, State bank of Bikaner and Jaipur and State Bank of Hyderabad and Bharatiya Mahila Bank with itself. This is the first time six banks would be merged with SBI at one shot. State Bank of Mysore said when it declared its first quarter results that it has made additional provision of Rs 579.7 crore towards specific standard assets to align with the State Bank group. The bank posted a loss of Rs 472 crore and made total provision of Rs 1,039 crore in June 2016 quarter against Rs 263 crore in the corresponding quarter. State Bank of Bikaner and Jaipur said it made an additional provision as prudence and keeping in view the provision as prudence and keeping in view the provision of the leader in the consortium and multiple banking arrangements of some borrowers.