More than external factors, it’s internal inefficiency that is troubling SBI. To continue as the big gun, it now needs to go through a reality check.
When State Bank of India’s new Chairman Pratip Choudhary announced the bank’s fourth quarter performance for FY 2011, it came as a shocker to almost everyone. It was down by 99% to a paltry Rs.208.80 million from Rs.18.67 billion in the year ago period. This even made the bank’s share to plunge as much as 18% at the bourses as compared to its pre-result prices. But the fact was that it was only because the bank took a bold step to make an one time provision for its non-performing assets and sidelined as much as Rs.23.30 billion, which could have easily bolstered the banks bottomline for the quarter. Nevertheless, despite a 9.84% fall in the bank’s net profit for the year, SBI still stands tall as the 5th most profitable company in the country with its registered net profit of Rs.82.65 billion. But with the first quarter of the fiscal approaching an end the question remains, after the disastrous performance in Q4, is everything alright now with SBI? Is it on track to hold onto its position in the current fiscal?
The answer perhaps is, tough, if not impossible. And the reasons, well, some are external to the company and some are self created. Talking about the problems that’s not in control of SBI, the biggest is of course the current sluggish economic conditions including inflation and continuous rate hikes by the Reserve Bank of India. With the apex bank raising its policy rates by 25 basis point early this month marking the tenth hike since April 2010, credit growth in the current financial year looks to be in jeopardy, more for the fact that the banks have no other option than passing the burden on to the customers. And with SBI being forced to shut down its teaser scheme, which was instrumental in the bank’s 20.32% credit growth last year, it may find itself in deep water in terms of lending. The bank too have understood the very fact. Thus, to prepare its stakeholders, it has already slashed its credit growth forecast by around 300 basis points to 16-19% from 19-22% given earlier.
The answer perhaps is, tough, if not impossible. And the reasons, well, some are external to the company and some are self created. Talking about the problems that’s not in control of SBI, the biggest is of course the current sluggish economic conditions including inflation and continuous rate hikes by the Reserve Bank of India. With the apex bank raising its policy rates by 25 basis point early this month marking the tenth hike since April 2010, credit growth in the current financial year looks to be in jeopardy, more for the fact that the banks have no other option than passing the burden on to the customers. And with SBI being forced to shut down its teaser scheme, which was instrumental in the bank’s 20.32% credit growth last year, it may find itself in deep water in terms of lending. The bank too have understood the very fact. Thus, to prepare its stakeholders, it has already slashed its credit growth forecast by around 300 basis points to 16-19% from 19-22% given earlier.
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
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and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
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