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From the Desk of the Chairman:
It is my privilege to present this preface to your Bank's Annual Report for the Financial Year 2012–13. As detailed in the report, your Bank continues to tread the path of sustained growth and maintain its flagship position in the banking space in India. We are confident that with the support of all our stakeholders your Bank will continue to prosper and achieve greater heights in the times to come.
Macro– Economic Scenario
Outlook for global growth for 2013 looks relatively better than the previous year, with reduced tail risks. On the domestic front, although growth contracted to around 5% in FY13, India continues to remain one of the fastest growing economies in the world. Outlook for the current fiscal with inflation now well within tolerance level, appears better than the previous year. Additionally, softening of global commodity prices should help reduce the imported inflation in domestic economy. Trends in industrial growth are encouraging. With exports turning positive, coupled with higher capital inflows, managing the current account deficit may be facilitated in the current year.
Against the above backdrop of a challenging macro–economic environment, the domestic banking system continued to enjoy the confidence of the banking public. This is reflected in the aggregate deposits of all scheduled commercial banks (ASCB) growing higher by 14.3% in FY13 against 13.5% growth in FY12. However, there was sharp deceleration in credit growth to 14.1% in FY 13 from 17.0% in FY12 due to a slow–down in investment demand and overall muted growth. Liquidity position was, however, normal as RBI provided refinance for exports. Since there was little head room to reduce the deposit rates, banks NIMs were under pressure.
Due to the downturn, many sectors were severely affected impacting the quality of assets financed by the banks. Gross NPAs of 40 listed banks went up by 43.1% from levels a year ago. Further the restructured assets book also showed an upward bias with recast assets under CDR around 50% more than the whole of last year.
Your Bank's performance
The deposits of your Bank have risen to Rs.12,02,740 crores with the annual growth at 15.24% over that of last year's level of Rs.10,43,647 crores. What is noteworthy is that not only is this better than last year's growth, which was 11.75% but your Bank has achieved this against the trend prevailing in the industry. Furthermore, it has come on the back of retail deposits and the deposit profile of your Bank shows a significant move away from high cost bulk deposits. Out of the total Term Deposits of Rs.6,04,649 crores, retail TDs comprise 78.27% at Rs.4,73,235 crores. Your Bank's strength lies in its wide reach covering all strata of society and the trust of the people. Due to this the customer acquisition growth is also encouraging. I am glad to state that under Savings Bank, 287 lac new accounts came to the books of your Bank representing 18.62% growth over last year and in Current Accounts we could clock a growth of 8.43% with new accounts accretion at 2.20 lacs.
The Bank continued to have good domestic CASA ratio at 46.50% which is better than all the major public sector banks and most private sector banks which helped in keeping the cost of funds low at 6.46% as at 31.03.2013.
On the advances front, I am happy to convey that your Bank has crossed the Rs.10,00,000 crores level and now the advances stand Rs.10,78,557 crores. Like the deposits, the growth of 20.70% over last year is better than the growth recorded by All Scheduled Commercial Banks. The growth has come mainly from a surge in advances to large corporates at Rs.50,549 crores, which represents an unprecedented growth of 40.28% during this FY compared to 15.23% (Rs.16,298 crores) achieved last FY. Mid corporate segment too has made a significant contribution of Rs.31,472 crores giving an 18.15% growth, as against Rs.12,173 crores (8.78% growth) last year. SME segment has, however, seen a lower off–take of Rs.20,383 crores with growth at 12.45% against 17.41% last year reflecting market conditions. It may be noted that your bank has been mindful of asset quality and nearly 80% of the incremental exposure is to investment grade assets based on external ratings. It was a conscious strategy of your Bank to provide competitive rates of interest to the better rated companies. This, along–with CGTSME and ECGC covers, as also fair distribution across verticals, has helped to de–risk the portfolio.
You will be glad to note that your Bank's retail story has been exceptionally encouraging. The retail segment growth has been to the tune of Rs.27,267 crores giving a growth of 14.95% against last year's 10.85%. Major drivers in this segment have been our Home Loans and Auto loans which have registered a 16.28% (Rs. 16,728 crores) and 35.47% growth (Rs.6,494 crores) respectively. Both the portfolios are quite healthy with impaired assets at just around 1% only. I am pleased to convey that because of our competitive rates, which has attracted new and take–over proposals, your Bank is currently ranked at number 1 in both these segments across the industry.
Under flow of credit to the farming community, your Bank has disbursed direct Agriculture loans of Rs.22,303 crores during the year, representing a growth of 25.85% covering 11.89 lac new farmers. Out of the total direct agriculture advance of Rs.1,08,584 crores standing in the books as at 31.03.2013, 30.77% i.e. Rs.33,409 crores is collateralised by gold. Your Bank was happy to provide an opportunity to the rural households to leverage their gold assets. It was for the first time that your Bank exceeded the stipulated ANBC bench mark of 13.5% in direct agricultural advances by reaching 14.24% as at 31.03.13. Your Bank has strengthened its reach to the agriculturists and added to its network 21 Agriculture Commercial branches opened at potential centres to capture emerging high value agriculture and agriculture related SME opportunity.
The above performance enabled the Bank to record an improvement in its market share in deposits from 16.29% last year to 16.46% during current year and in advances from 16.09% to 16.66% in the corresponding period. The Bank's CD ratio as at 31.03.2013 stood at 82.4 compared to All Scheduled Commercial Banks 78.
During the year, the Bank expanded its reach by adding 719 branches to its network comprising 123 in Metros, 122 in Urban, 170 in Semi–Urban and 304 in Rural areas. As at 31.03.13, out of total 14,816 branches, 66% (9851 branches) are in Rural and Semi–urban areas.
On the financial inclusion front, your Bank has rolled out 38,480 Business Correspondent Customer Service Points through alliances both at the national and regional level. Transactions volume through BC channel has grown 2.4 times during FY12–13 at Rs.13,033 crores over FY 11–12.
State Bank group has one of the largest ATM networks in the world with 32,752 ATMs as on 31.03.13. The position would have been much better but for significant restrictions during the year on expanding ATM network which prevented the Bank from fully leveraging the group's large debit card base of 136 million debit cards. On account of this, the Bank ended the year as a net issuer and paid out inter–change fees of Rs.66 crores during the year.
Your Bank has introduced Cash Deposit Machines to facilitate customers to deposit cash in their accounts by swiping their SBI ATM cum Debit card. As on 31.03.13, the number of CDMs installed was 665.
The Corporate Social Responsibility (CSR) activities of your Bank continue to gain momentum and earn accolades. The Bank's pan India campaigns under CSR provide support to a host of socially relevant schemes and this year's highlights included providing safe and clean drinking water facility through installation of 43,161 water purifiers to 42,000 schools benefitting 84 lac students. The programme of providing fans was also continued with supply of 1,40,000 fans to 14,000 schools. I am happy to convey that for the first time in the history of your Bank, the CSR spend has crossed the milestone of Rs. 100 crores touching Rs. 123 crores in this fiscal.
Profit and NIM parameters
Though the challenges of the environment were felt across the banking system, your Bank displayed great resilience and could sustain a sound performance under most parameters due to strategic and market oriented initiatives. I am happy to report that your Bank, on a consolidated basis, recorded a 16.77% growth in net profits standing at Rs.17,916 crores. On a stand–alone basis also, your Bank recorded a Net Profit of Rs.14,105 crores, up by 20.48% over Rs.11,707 crores achieved last year. This places your Bank amongst the top 3 corporates in the country.
Total Interest income grew by 12.33% to a level of Rs.1,19,657 crores up from Rs.1,06,521 crores last year, total interest expenses were on a higher trajectory with a growth of 19.13%. Consequently, the Net Interest Income increased from Rs.43,291crores last year to Rs.44,331 crores this year, reflecting the business environment. Non– interest income growth too was on similar lines gaining 11.73% and increased to a level of Rs.16,035 crores from Rs.14,351 crores last year. This position is, however, not strictly comparable as last year income from Pension Fund was included while this year the Pension Fund is outside the Bank. In this context, the performance of our Treasury portfolio has been outstanding and has made a significant contribution moving from a whole bank loss position of Rs.920 crores on sale of domestic and foreign investments (Equity, MF and Bonds) last year to a profit of Rs.1098 crores this financial. In the process the Bank has churned the portfolio to exit out of poor quality stock. Currently, Bank's investment policy envisages subscribing only to indexed stocks.
Operating expenses increased by 12.33% to a level of Rs.29,285 crores against last year's Rs.26,069 crores mainly on account of overhead expenses due to significant increase in the physical spread and up gradation of branch ambience, results from which will flow–in in the coming years. Staff costs, including provision for superannuation benefits, have increased from Rs.16,974 crores to Rs.18,381 crores an increase of 8.29% primarily due to all round increase in inflation. However, as a proportion of Operating expenses, staff expenses have declined to 62.77% from last year's 65.11%.
The Net Interest Margin (NIM) for whole bank is in line with the guidance and better than the average industry norm. Looking to the severe competition and NPA position, the NIM was under pressure. Though this is lower than that achieved last FY, at the level of 3.34% your Bank continues to rank high amongst peers. On the domestic book the NIM stands at 3.66% and for the foreign offices it is at 1.50%. If interest from liquid Mutual funds is considered, the domestic NIM improves to 3.71%.
The level of impaired assets has shown an upward bias, symptomatic of the state of the economy, and we experienced an unprecedented level of delinquencies. The deterioration has occurred in the mid–corporate space in sectors under stress in the economy namely Paper and Plastics, Iron and Steel, Textiles, Engineering Goods, Transport, etc. Gross NPAs are currently at 4.75% with Net NPA level of 2.10%. Special efforts made during the course of the year, especially during Q4 FY13, in the direction of NPA management paid good dividends which enabled control, significant improvement in the last quarter and prevented the position from getting out of hand. Your Bank has done the requisite provisioning with provision for NPAs during the year at Rs. 11,368 crores. The Provision Coverage ratio stands at 66.58%. The total restructured assets book stood at Rs. 43,111 crores of which Rs. 32,228 crores are in the standard category and Rs. 10,883 crores in the NPA category.
While external factors had a large bearing on the growth of NPAs, special efforts were made by your Bank to contain the impact through stringent loan screening, close follow–up and interaction with the borrowers, setting up of special teams for recovery, re–structuring and re–scheduling on a case to case basis and merits, recourse to SARFAESI, real time monitoring through account tracking centres and related ground level resolution strategies. In fact in the last quarter of the FY 2012–13, there was a significant contraction of Gross NPAs from Rs. 53,458 crores (5.30%) in Q3FY12–13 to Rs. 51,189 crores (4.75%)at the end of Q4FY12–13. Overall, the effort saw Upgradation of Rs. 10,119 crores and Cash Recovery of Rs. 4,766 crores in the NPA accounts. Recovery in Written Off/AUCA accounts was to the tune of Rs. 1066 crores during the year. In the times ahead and supported by the growth in the real economy, we are not going to allow any let up in our efforts at resolving the impaired assets through timely and proactive measures.
The Capital Adequacy Ratio of your Bank stands at 12.92%, against RBI stipulation of 9%, with Tierl capital at 9.49% and Tier II at 3.43%. The CAR remains strong and the strength comes from the following three factors:
a) Robust internal generation and plough back of profits of Rs.10,890 crores;
b) Capital infusion of Rs.3004 crores by the Government; and
c) Continuous and on–going efforts at optimizing capital
Looking to the fact that the rules for Tier II capital have become quite stiff and challenging, your Bank did not think it optimum to raise tier II capital.
Your Bank continues to enjoy very good market valuations and is currently ranked 8th amongst top 10 market cap companies and number 1 amongst Public Sector banks.
The Bank on a consolidated basis continues to be amongst the top tax payers of the country with tax payout during FY12–13 at Rs.7,559 crores against Rs.8,639 crores last FY, the reduction coming about on account of prudent and efficient tax planning measures.
I am happy to announce that the Board of Directors of your Bank has declared a dividend of Rs.41.50 per share (415%) for the year ended 31st March 2013.
New Business Drivers
1. Low cost (Rs.100) Personal Accident Cover of Rs.4 lacs for all SB account holders of the Bank;
2. Inter core charges for transfer transactions made NIL;
3. Pre–payment penalties abolished;
4. No minimum balance requirement for SB accounts;
5. SME Insta Deposit Card for MSME segment, State Bank Business Debit Card and State Bank Virtual Card launched;
6. Introduction of on–line Savings Bank account opening facility;
7. Multi city cheque books provided to all our customers.
Associates and Subsidiaries
I am happy to convey that your Bank's Associates and Subsidiaries continue to achieve good growth traction. During the year, the 5 Associate banks saw their consolidated PAT at Rs. 3,678 crores. Their Operating profit increased from Rs.8,214 crores to Rs.8,802 crores in current FY. All these banks are profitable and well capitalized with average NIM at 3.13% and CAR averaging 11.85% as at 31.03.13.
Of the non–banking subsidiaries, SBI Life Insurance Company Ltd. posted a PAT of Rs. 622.20 crores, a YOY growth of 11.87% and has emerged as the private market leader in new business premium for FY 12–13. SBI Capital Market Ltd. has registered a YOY growth of 17.92% in PAT reaching a level of Rs.296 crores. SBI Cards and Payment Services (Pvt.) Ltd., the only stand–alone card issuing company in lndia,continues to excel with a PAT of Rs. 136.30 crores representing a YOY growth of 258%. SBI General Insurance Company Ltd. has issued 7.28 lac policies across Retail, SME and Corporate segments garnering premium of Rs. 771 crores, a rise of 208% over previous fiscal. SBI DFHI registered an excellent growth of 84% in their profit over that of last year improving from a level of Rs.43.50 crores to Rs. 80.29 crores.
Honours and Awards
Your Bank's achievements in various fields have received national and international recognition as enumerated below:
i. FE Best Banks Award–Award for Initiatives
ii. National Award– 2011–12 Best Bank for Excellence in the field of Khadi & Village Industries (PMEGP)
iii. "Agriculture Leadership Award 2012" from Agriculture Today under Development Leadership category.
iv. "Best IT driven Innovation Award in Banking" in the Country from NASSCOM was awarded to APGVB, RRB sponsored by SBI.
v. Ministry of Rural Development, GOI, awarded "Certificate of Excellence" for Bank's proactive role in establishing Rural Self Employment Training Institutes across the country during the year 2011–12.
vi. Asia's Best CSR Practice Award instituted by CMO Asia has been awarded to the Bank in Singapore.
vii. 'Asian CSR Leadership Award 2012' has been conferred to the Bank in Dubai.
viii. IPE Best CSR Award – 2012.
ix. Most Caring Companies of India Award – 2012.
x. Star of the Industry Award for excellence in Banking (PSU) – 2012.
xi. Golden Peacock Award 2012' in Corporate Governance by the Institute of Directors on 11th October 2012
xii. Golden Peacock National Training Award–2012.
The Road Ahead
The economy appears to have bottomed out and we can look forward with enthusiasm to exciting times ahead. Challenges remain and in a dynamic and growing economy new ones will surface but we are hopeful that with the fresh thrust to balanced growth initiatives by the Government and support from RBI with appropriate monetary policies, the banking industry shall achieve greater heights. Your Bank has demonstrated its resilience in the current challenging environment and I am confident that we have the strength and resources which, along with the trust our customers have reposed in us, will enable us to withstand any adversity and emerge stronger.
I would like to thank each and everyone of our employees without whose efforts and commitment your Bank would not have been in the strong position it is in.
I would also like to thank all our shareholders for their belief in us and their support in our endeavor towards progressive growth.
With warm regards,