Bright sparks amid bad numbers for Pratip Chaudhuri

While the SBI chairman couldn't live up to his promise of improving asset quality, he leaves the country's largest bank in a better shape in terms of profits and NIMs

Two words describe Pratip Chaudhuri’s 30-month tenure at the apex of State Bank of India (SBI) – ‘higher provisioning’. In his first quarter as the chairman of the country’s largest bank, he took a hit of 99 per cent in profits because of higher provisioning of Rs 10,000 crore due to non-provision of pension liability for the previous five years.

On Monday, the bank’s first quarter profits fell 13.6 per cent due to a rise in bad loans, provisioning for pension and loss in the value of investment bonds. But Chaudhuri, who retires in September, had little option in front of him.

Experts feel he has not done too badly. “Chaudhuri’s aggression in terms of provisioning even in his last quarter was commendable. I would compare him with M V Tanksale, the chairman and managing director of Central Bank, who took a similar position before retiring,” said the head of banking in a leading consultancy firm, adding Chaudhuri even made provisions for prospective wage increases.

If one looks at profits and net interest margins (NIMs), things have improved in his tenure. The man worked hard to improve the bank’s balance sheet. In his predecessor O P Bhatt’s entire five-year tenure, SBI’s profit after tax (PAT) (year-on-year) grew over 20 per cent only twice, in FY08 and FY09. In fact, in Bhatt’s last two years, FY10 and FY11, PAT grew 0.5 per cent and fell 9.8 per cent, respectively. (STORY IN NUMBERS)

Under Chaudhuri, SBI’s PAT grew over 20 per cent in both FY 12 and FY13. Even NIM improved, marginally, in FY12 and FY13 at 3.9 per cent and 3.3 per cent.

In the first quarter of FY14, it declined to 3.2 per cent but Chaudhuri expects it to stay at 3.5 -3.6 per cent for the year.

Non-performing assets, however, was the Achilles’ heel. Gross NPAs, as a percentage of total loans, have increased to 5.6 per cent from 3.3 per cent in the period he has been the chairman.

Vaibhav Agarwal, vice-president (research), Angel Broking, is not too buoyant about SBI’s prospects in the next two quarters, “For one, treasury losses would continue and asset quality will continue to be bad. In addition, macroeconomic headwinds and management changes.”

No wonder, the stock price has fallen 37.5 per cent to Rs 1,604 since he took over. The fall in market cap has been a whopping Rs 66,000 crore in just 28 months.   

Agarwal feels given the size of the bank, its current account/savings account (Casa) is at a healthy 45 per cent. But its return on equity (RoE) at 13 per cent is among the lowest. HDFC Bank’s RoE, for instance, is 22 per cent and YES Bank’s is 26 per cent.