SBH sees no immediate merger with parent

Registers 21% fall in Q4 net at Rs 380 crore; to focus on retail, MSME loans for growth State Bank of Hyderabad (SBH) on Wednesday ruled any immediate merger with its parent State Bank of India (SBI), and said it would continue as an independent bank for now. "As of now, there are no merger plans for SBH. We will continue to function as an independent bank as we are doing now. The merger of SBH with SBI is not on the cards," M Bhagavantha Rao, Managing Director, SBH, told media after announcing financial results for the fiscal FY-13 here.

To buttress his point, Rao said SBH had already commenced construction of its head office at the financial district in the city. "Who will go ahead with such construction if the merger is on the cards?" he asked. Rao's statement assumes significance in the wake of SBI Chairman Pratip Chaudhuri's comment on Monday that the issue of consolidation of SBI's associate banks may be taken up for consideration after July this year. However, Rao said it was for the central government to take a decision on the issue. "Merger as a philosophy some time may favour and sometime may not favour. There has to be economic rationale for the merger," he said. The consolidation proposal makes economic sense as the size of Indian banks is not comparable to the biggest banks in the world, he added. Meanwhile, the city-based premier bank registered 21.03 per cent decline in the net profit at Rs 379.90 crore for the fourth quarter ended on March 31, 2013 on account of higher provisioning and increased expenses. The bank's net profit was at Rs 481.04 crore in the same quarter a year ago. The total interest income for the quarter climbed 7.27 per cent to Rs 3,227.55 crore as against Rs 3,008.73 crore in the corresponding three-month period a year ago. Rao attributed the decline in net profit to higher provisions for slippages and expenditure. "We have provided Rs 480 crore towards non-performing assets (NPAs) at a provision coverage ratio of 65 per cent which is higher than the ratio stipulated by RBI. We have done this to strengthen our balance sheet. Besides, we have also set aside funds for upcoming wage revision so that we don't have to take the hit at one ago," he explained. For the entire fiscal year 2012-13, SBH posted net profit of Rs 1,250.22 crore, down 3.7 per cent from Rs 1,298.27 crore in FY-12. However, net interest income was up 16.45 per cent at Rs 3,917.9 crore from Rs 3,364 crore a year ago. The bank's Gross NPAs zoomed to Rs 3,186 crore during the last fiscal from Rs 2,007 crore in the previous fiscal. The net NPAs also increased to Rs 1,449 crore from Rs 1,002 crore a year ago. Road projects, food processing, textiles, metals, and gems and jewelry contributed to NPAs. Rao said the bank will henceforth be cautious while extending loans to road as well as power sectors. "There are lots of issues with regard to roads sector as projects aren't being completed on time due to various issues. We will also be extremely careful about power sector as well as gems and jewelry segment," he explained. On the outlook for current fiscal, he said the bank would focus on retail and MSME loans for growth. It will log in an overall growth of 16 per cent in deposits and advances, he added. On recent allegations of money laundering against banks exposed by Cobrapost website, Rao said the SBH would educate its staff on need of strict adherence to KYC norms. "Thankfully our bank is not in the list. We will treat the issue as zero tolerance area and no mercy will be shown on those who indulge in such activities," he said.