SBI : THE HORRENDOUS RESULT FY 2017

State Bank of India (SBI), India’s largest bank, became even larger with the merger of its five commercial banking subsidiaries on April 1, 2017.

 SBI chairperson Ms. Arundhati Bhattacharya at the beginning indicated that she was confident the step would make the bank a global player and expected to boost the bank’s annual profit by Rs 3,000 crore in three years.

But SBI profit declined from Rs 12225 Crores in preceding financial year 2016 to a meagre Rs 241 Crores in financial year 2017 as per SBI's declaration of its results on 19.05.2017. But why so ? Let us analyse the facts as under : 

a) to  unexpected horror to all of us the great merger towards becoming a global entity the loss of those 5 subsidiaries or erstwhile associates whatever the term the amalgamated losses is Rs 5792 crores for Q 4 only and cumulative loss Rs 10243 crores for the whole year. This merger has directly affected the annual figure of SBI.

b) SBI subsidiaries such as SBI Life and general insurance, reported annual profits of nearly Rs 2,000 crores,  without these the losses would have been higher. 

c) SBI declared a dividend of Rs 205 per share and this will drain Rs 2073 crores from its own exchequer i.e reserve fund and that share holder may oppose.

d)  Post  results scenario , on May 22, SBI’s share  price fell by 4.6% to Rs 294 and it is currently trading Rs 288, indicating investor apprehension with the huge and unexpected losses of its former banking subsidiaries. 

e) Consolidated loss of those erstwhile associate Banks up to Q 3 was Rs 4550 crore and how it soared so high in last quarter i.e Q 4 in absolute term for Rs 5792 crores?There is no explanation in the public domain by SBI regarding what had happened to cause such a deterioration in the final quarter.

f) SBI’s press release, apart from the mandatory disclosure of consolidated annual results, was a single sentence, “Net Profit (after minority interest) of SBI Group declined from Rs 12,225 crore in FY’16 to Rs 241 crore in FY’17…” Why the rich heritage of SBI  maintaining total silence in public domain ? Was this is a so called hair cut in technical term to cover up the bad  loans of its erstwhile subsidiaries?

g) What was particularly disturbing was the complete lack of transparency regarding disclosing these  in the SBI results, in which the bank only focused on the far better standalone results. Was this consolidation to become a global giant is camouflage to bail out those poorly managed associate Banks ?  

h) Who will be accountable in public domain for huge loss of profits?

To bridge the gaping hole of erstwhile associate Banks have backfired in SBI’s consolidated balance sheet, the bank is ready for  an equity issue of nearly Rs 10,000 crores.  However, as the immediate experience of the SBI merger has shown, reality can be very different from the visions of consolidation. 

Data Source: the wire.com