SBI Views Cost Savings, No bad Loans Surprise following Merger with Units

Nations top lender by assets, State Bank of India expects no nasty surprises on bad loans following the merging of five subsidiary banks with itself at the weekend in a contract which helps in cost savings and gain scale. The Government moves to merge State Bank of Travancore, State Bank of Patiala, State Bank of Mysore, State Bank of Hyderabad and State Bank of Bikaner and Jaipur with State Bank of India, which already owned bulk stakes in the units, is seen as the commencement of consolidation in India’s public sector banks.

SBI also took over the Bharatiya Mahila Bank, a niche lender to women, as regulators aim to increase the sector with fewer but better-capitalised bankers at a time when Indian banks are battling the bad loans records and need billions of dollars in new capital.

The lender said, “this merger will sling the SBI to the league of the top 50 global banks by assets, with a far bigger appearance in all corners of the country, with 24,000 branches and 370 million customers.”

Cost Savings

Cost Savings

On Monday, Chairman Arundhati Bhattacharya and other senior executives at a news conference said, “The bank decided to relocate 1,800 branches to utilize resources better, go slow on starting new branches and rearrange staff in a bid to cost savings and gain scale.” More than 200-year-old bank has also begun a Voluntary Retirement Scheme to rationalize its headcount.

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In late 2013, Bhattacharya took the wheel of the parent bank and surprised the market by handling bad loans better than its state-run peers, who together account for the bulk of India’s $149 billion soured assets. She tries to assure investors at the discussion that there will be no nasty surprises on bad loans going ahead. The subsidiaries have a greater bad-loan ratio than the parent.

Cost Savings

Cost Savings

She said, “SBI started preparing early, and has made extra provisions of about 86 billion rupees which are above what it required to make after the asset status review ordered by the Reserve Bank of India.” Further, she said: “To that extent, we are very well-positioned for taking the merged group ahead.”

After the annual results in May, State Bank of India will set “quantitative goals” containing the pure profits they can achieve for the merged organization. The banks also aim to unite all their databases by May 27, while a complete integration will occur in the June quarter, senior executives said.

Author: RajKumar

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