Their Reign Continues

State Bank of India (SBI) group is all about size ? assets of Rs 14,50,143 crore at end-March 2010. Of course, the group?s asset size can be attributed to legacy, and history ? nine associate banks. But there is more to the group.

When most of its rivals paused to make sense of the new world order, it was business as usual at SBI. Its credit-deposit (CD) ratio (the part of every Rs 100 in deposit given out as credit) was 73.56 per cent for FY10, up from the 66.63 per cent in FY09. The CD ratio for other banks declined to 72.22 per cent from 72.32 per cent. The group?s net profit was also up 7.11 per cent at Rs 11,769.32 crore for FY10; that of its associate banks? was up 17.74 per cent to Rs 3,266 crore.

SBI and the associate banks have distinct identities but are omnipresent as a group ? from home loans (which grew 31.7 per cent to Rs 71,193 core in FY10) to corporate finance to government business. However, the biggest positive going for SBI is its low-cost deposits.

Of its deposit growth of Rs 62,043 crore, current and savings accounts (Casa) accounted for 26.76 per cent (22.25 per cent in FY09). The Casa to total deposits ratio was 46.67 for FY10 (39.29 per cent in FY09). Its market share in total deposits at end of FY10 was 16.31 per cent.

The group is also adding bulk. In the last quarter of 2010, it roped in 27,000 new staffers (3,500 for SBI) and opened 1,049 new branches to take the total to 12,496. Adding 7,788 ATMs during the year has taken the total SBI network to 21,485 ATMs. The banks hope ATMs will improve productivity. The expansion affected the bottom line by Rs 923 crore during 2009-10.

The bank also took a hit of Rs 273 crore due to excess liquidity overhang on an average daily basis of Rs 44,103 crore in the last quarter of FY10. Hardening yields affected its profits in government securities by Rs 1,389 crore.
But the behemoth chugs along. SBI is the only Indian bank in the Fortune Global 500 list, ranked 363 this year. It was ranked 64th among the Top 1000 banks in the world by The Banker.

ICICI Bank rewrote the rules of the financial services when it moved smoothly from being a fuddy-duddy, old-world development finance institution into a new-age bank. The script went a bit awry on the way, but the bank is ready for a comeback.

At the end of March 2010, ICICI Bank?s loan book shrank by 17 per cent to Rs 1,81,206 crore; largely due to repayment of retail loans and loans from its overseas arms. But the deposit side saw improvement. In FY10, Casa grew 34 per cent to Rs 84,216 crore (from Rs 62,668 crore in FY09); and the Casa share of total deposits was 41.7 per cent (28.7 per cent in FY09).

In FY10, the bank?s strategy was to get to a jump-off point on the growth trajectory; the effort was to get the four Cs under control: Casa, costs, credit quality and capital. It cut back operating expenses by 17 per cent, to Rs 5,718 crore. Total provisions declined 26 per cent to Rs 972 crore in the fourth quarter from the Rs 1,324 crore in the first quarter. And its net non-performing assets (NPA) ratio at the end of the same period was 1.87 per cent (2.19 per cent in FY09). The provision cover ratio was 59.5 per cent (51.2 per cent in FY09). Also, the central bank has given it time the till end of this fiscal to reach 70 per cent provisioning cover.

So where is ICICI Bank headed? In an investor presentation in May, the bank was categorical that it will be back on the growth path this financial year. Its plan is fairly straightforward ? it will ride the broader economic recovery, expand its network of branches, and rebalance its liabilities thus growing the balance sheet.

ICICI Bank is currently digesting the acquisition of Bank of Rajasthan, which will increase its branch network by 25 per cent and help garner more Casa and retail deposits. By May 2010, ICICI Bank?s branch network had crossed the 2,000 mark, up from 1,419 at end-March 2009.

ICICI Bank will be back on the retail front ? mortgages and vehicle loans ? with a carefully calibrated play in personal loans and credit cards. It may rewrite the rules again.

When Punjab National Bank (PNB) rolled out operations in 1895, it chose ?stability? as its telegraphic address. It had to move home from Lahore after the Partition, and it lost 33 per cent of its branches and 40 per cent of its deposits. Now, 115 years on, PNB is India?s second-largest state-run bank (after SBI). Its net profit was Rs 3,905 crore in 2009-10, up 25.4 per cent over the preceding fiscal. Operating profit for the period stood at Rs 7,326 crore, up by 28.8 per cent.

Very much a no-frills bank, its strength lies in garnering deposits, much like most state-run banks. It had Rs 2,49,330-crore deposits as on March-end 2010 ? an absolute accretion of Rs 39,570 crore and a growth of 18.9 per cent over preceding fiscal. The share of Casa deposits was 40.85 per cent.

Once a bank gets its liability game right, then it is well on track to grow its books. PNB?s advances grew 20.6 per cent to touch Rs 1,86,601 crore in FY10. Incremental advances during the year were Rs 31,898 crore. That?s not all. PNB?s net non-performing asset (NPA) was 0.53 per cent at the end of March 2010 ? Rs 338 crore NPA was on account of agricultural advances. This was eligible for debt relief until the end of the last fiscal and then was extended to June this year. Excluding this amount, the NPA ratio improves to 0.35 per cent.