SBH faces Blues ahead of Merger with SBI

SBH faces Blues ahead of Merger with SBI

There might be just one more quarter left ahead of the SBH — State Bank of Hyderabad stops filing separate financial results in the run-up to the merger with SBI, like the other 4 associate banks of the nation’s biggest lender. However, the results filed by the bank for the September quarter have just denied it a place in history of being a consistently profit making bank since its inception in the year 1941 or from 1956 when it was first taken over by RBI — Reserve Bank of India.

SBH, with a total business of Rs 2.53 lac cr, has registered a whopping Rs 776.64-cr net loss in Q2 of the current financial year. This was because of steep rise in the incremental provisioning towards NPAs as the State Bank of India asked the bank to keep inherent weakness in the common loans and advances also in mind when it comes to provisioning. The SBH officials said that this was the first time that the bank has ever registered losses in its history.

The quarterly loss was too big considering the fact that it had reported a net profit of Rs 1,064.93 cr in the financial year 2015–16. During the first quarter ended June, 2016 its net profit fell to as low as Rs 28 cr from Rs 251 cr in the year ago period as provisioning towards NPAs rose to Rs 892 cr from little over Rs 300 cr in the corresponding previous quarter. The provisioning requirement ballooned to Rs 2,266.7 cr by the time it concluded the Q2. Meanwhile, SBI share price was trading 0.52 per cent higher at Rs.258.95 on the NSE today.

Sources in the bank said that though they cannot rule out some fresh slippages during Q2, the provisioning made wasn’t entirely on account of these slippages.

Consider a scenario where a company which has received loan from a consortium of banks (which includes SBI and its associate banks) kept loan payment up to date with regard to the SBH but defaulted on repayment to the SBI. The bank was asked to classify loans in all such cases as NPAs for the sake of provisioning as post merger those loans will have to be reclassified as NPAs by the SBI as they become 2 loans of a single account, sources said.

In its statement the SBH management said that the net loss was due to higher loan loss provisioning while the operating profit grew by 36.30 per cent at Rs 1,101 cr as compared to Rs 807.8 cr in the corresponding previous quarter.

These numbers may not matter much to State Bank of Hyderabad (SBH) as it become non-existent in the next few months. As per bank officials, SBI is likely to start reporting the financial results together with that of the merged banks as a single bank from the next financial year.

Source : https://www.dynamiclevels.com/en/blog/sbh-faces-blues-ahead-of-merger-with-sbi