Saturday, November 11, 2017

SBI targets overseas expansion; standalone profits dips in Q2

STATE Bank of India (SBI) will open more branches in neighbouring Nepal and consider options to re-enter Vietnam under a three-year goal to grow its global operations to as much as 15 percent of total business, a senior executive told an international news agency. SBI, with assets of more than $500 billion, has joined into the bandwagon of the top 50 global banks this year after it merged five subsidiary banks with itself.
But mergers and acquisitions are expected to play...
only a tiny role as SBI seeks to ramp up growth in the overseas business, which now makes up about 11 percent of all operations. Instead, it will rely on organic growth and ensure profitability is not forsaken.
SBI, which is present in 35 countries but has more than half of its 206 offices in Asia, aims to increase the number of offices in neighbouring Nepal to 100 in the next one year from 88 currently to better tap a market it considers “under-penetrated” for banking, said Siddhartha Sengupta, a deputy managing director who leads the bank’s international business.
The Indian government majority-owned bank is also looking at options to re-enter Vietnam, where it closed its office long ago, possibly through a partnership, Sengupta said, noting the Vietnamese economy, and trade between the Southeast Asian nation and India, were growing rapidly.
“We had an Asian focus. But we are trying to make that focus sharper,” Sengupta told Reuters.
“In terms of inorganic growth, whatever our aspirations are would be far smaller compared to what we have seen in the domestic market. We have a limited dollar balance sheet.”
SBI’s overseas push comes at a time when rivals in China, Japan and Southeast Asia are expanding outside their home nations and have made far deeper inroads into Asia, often through M&As.
SBI’s overseas growth plan also comes at a tricky time for India lenders who have been burdened with a record $146 billion in bad loans. Sengupta said the overseas growth would be in a “risk-mitigated” fashion and not at the cost of profitability. The expansion may not lead to a substantial rise in the total number of international offices as SBI is also shutting unprofitable ones, he said.
SBI will also step up its offerings in Bangladesh and Sri Lanka. SBI plans to pursue more collaboration and syndication opportunities at the annual meeting of the Asian Bankers Association it is hosting in Mumbai next week. SBI expects a new subsidiary that will house its retail operations in the United Kingdom to begin functioning in January-March 2018.
Meanwhile, SBI on November 10 posted multi-fold jump in consolidated net profit at Rs 1,840.43 crore for the second quarter (Q2) ended on September 30. The growth was due to sale of its stake in SBI Life Insurance.
Its profit was just Rs 20.70 crore during the same quarter of the last financial year.
On standalone basis, SBI’s profit declined by 37.9 per cent to Rs 1,581.55 crore, from ₹ 2,538.32 crore on account of rise in bad loans.
Total income on standalone basis increased to Rs 65,429.63 crore in July-September 2017 against Rs 50,742.9 crore in the same period a year ago, State Bank India said in a filing to stock exchanges.
As of September 30, the bank’s gross NPAs deteriorated to 9.83 per cent of gross advances, compared with 7.14 per cent year a year ago. Similarly, the net NPAs rose to 5.43 per cent from 4.19 per cent.
In absolute terms, its gross NPAs rose to Rs 1, 86,114.60 crore, from Rs 1, 05,782.96 crore at the second quarter of the previous fiscal.

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