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‘Salaried class is our prized asset’

The board of State Bank of India met on Saturday, to consider its second quarter financial performance.They declared a profit of 36%.

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MUMBAI: The board of State Bank of India met on Saturday, to consider its second quarter financial performance.

The country’s largest commercial bank declared that second-quarter profit rose 36%, well above analyst expectations.

Net profit rose to Rs 1,611.42 crore in the three months ended September 30 from Rs 1,184.49 crore a year earlier.

While details of SBI’s follow-on public offering is still fuzzy and lacks clarity because its largest shareholder, the government, which owns 59.73% of the stock is yet to decide on the mode of raising funds.

Soon after the board meeting, SBI chairman Om Prakash Bhatt and his board met analysts at the SBI auditorium and answered most of their questions. Some key takeaways from the analysts conference.

On the size of the follow-on offering which is awaiting government approvals.

Anywhere between Rs 10,000- Rs 20,000 crore, I’ll be happy. It depends on the kind of approval we get from the government.

Whether the government is willing to put the money... but something will happen this year.

On a cut in deposit rates.

We are all awaiting RBI’s credit policy. There could be some kind of a cut in deposit rates. This quarter, even if business picks up, we’ve got a huge amount of liquidity.

On the merger with State Bank of Saurashtra, and going forward, mergers with other associate banks.

We don’t have a time table. We want to see how smooth is this merger (with State Bank of Saurashtra). We are hopeful of making it as smooth as possible. At the moment, our focus is to make the first merger path-breaking

On benefits flowing from mergers with associate banks.

There are obvious benefits. These are mutual benefits that flow to our associate banks and to us on various fronts like branch rationalisation etc.

How long can such banks with the size and scale they command survive?

Costs and reach have become very important in the current banking environment. We’ll also have the benefit of greater capital.

Benefits accruing from accretion in capital and net worth are far higher, and thus benefits flowing to the customer would be far greater.

On SBI’s retail banking and any cause for worry.

We have been extremely good in this segment. More than 80-90% of our retail credit goes to salaried people. The salaried class are our prized assets.

They get a salary every month and these are people who, ‘come what may’ will always honour their commitment.

We clearly believe they are anchor-stones for our growth.

On expansion of its branch network, ATM network.

We plan to double the existing customer base (from 100 million customers) over the next five years and triple our ATM network (to 25,000 ATMs) .

This year, we will set up our 10,000th branch. We are also expanding our rural business by aligning with Indian Posts.

We’ll develop an outreach for financial inclusion and reach 1 lakh villages that are un-banked currently.

On SBI’s foreign branches and its share in the lucrative NRI remittances market
Mexico was the leader in the world remittances market.

India has overtaken Mexico recently to record the largest remittances inflow by any country. SBI’s share of the remittances business is in the region of 24-25%.

We are not satisfied to merely maintain our share. We want to double it. Our aim is to garner a 50% share in the remittances market in the next three years.

Our spreads have become very good because of the sub-prime crisis. Our profits have grown between 60-75%. We are riding on the India growth story.

On costs of deposits and the provisioning of non-performing assets.

Cost of deposits may go up by 5,10 or 15 basis points. But I feel optimistic that the margins would get bigger. The provisioning of NPAs is adequate.

In fact, the quality of our NPAs (collateral) is better. The old NPAs have been written off.

On SBI’s strategy for non-fund based income.

Our plan for non-fund based business is to make it wide and deep. It is far more than what it used to be in SBI or, for that matter, in any PSU banks.

We are poised to make it better. Going forward, we will introduce structured products , derivatives, sale of gold coins, bullion trading etc.

We have also become aggressive when we participate in syndicate lending. Earlier, we were satisfied with whatever we get.

Now, we demand and get proportionate share from the consortiums.

On core banking solutions.

Our core banking solution is almost 90% done. For us, the systems in place give us a huge advantage.

We are setting up a central data warehousing centre, which will be ready in two years. Core banking is just the beginning.

Our cash management has improved so much that we have improved our clientele in the mid-corporate segment.

We are beefing up our technology platform and set up a cutting edge payment gateway.

On SBI Life Insurance and their funding needs.

We are looking at putting Rs 500 crore this year. Next year, they will need Rs 2,000 crore and after that the insurance business would need about Rs 5,000 crore.

A holding company for the insurance business would help. Otherwise, we have to fund from SBI. Our growth could get stunted in the process.

A holding company for the insurance business can, on the other hand, approach the markets for funds.

On attracting talent as it grows abroad and expands its local operations.

Our focus is not only to attract talent but also retain talent. SBI’s talent is getting poached as we make great progress in various segments of banking But we’ve done extremely well in retaining talent.

We are now offering contracts to attract talent in the technology, treasury and risks arena.

We have leading global management institutes like Harvard and Stanford to fine-tune our course content and hone our skills further.

We have a programme ready and are currently identifying and enrolling 500 young leaders to our leadership factory in IIMs. This is a rolling project and ongoing annual programme.

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