Pratip Chaudhuri, Chairman, State Bank of India is more optimistic of India's economic growth than most economists who see GDP growth below the 5 percent mark.
India’s fourth-quarter and full fiscal year 2012-13 gross domestic product (GDP) growth figures are expected tomorrow (Friday, May 31) and most economists are predicting that the economy would have growth sub 5 percent, worse than the government's estimate of a lowest-in-decade 5 percent growth.
But Pratip Chaudhuri, Chairman, State Bank of India ( SBI ), in an interview to CNBC-TV18 said FY13 GDP growth would come in above 5 percent. "For banks index of industrial production (IIP) numbers are more important than gross domestic product (GDP) number but I expect the overall GDP growth number to be upwards of 5 percent."
The bank reported nearly 19 percent year-on-year drop in its fourth quarter (January - March, FY13) net profit at Rs 3,300 crore. Higher provisions against non-performing assets (NPAs) and marginal growth in other income dented the bank's profit margin.
Chaudhuri said they expect to see improvement in asset quality going forward and have seen an improvement in asset quality ratio in Q4.
He also cleared the air over recent insinuations of SBI's involvement in Know Your customer (KYC) norms violations saying his bank was not named in the RBI report. Chaudhuri is also hopeful of a CRR cut in June.
Below is the verbatim transcript of his interview on CNBC-TV18
Q: First I am going to talk about the big data that is lined up tomorrow, the Q4 gross domestic product (GDP) data. Most economists are expecting a sub 5 percent number to come in this time around. What is your estimate of where growth is headed and what we could see in terms of FY13 as well as the Q4 number?
A: I would not be too much focused on the overall growth number. But for the business of the bank it is the index of industrial production (IIP) number which is more important. The index of industrial production because that is where most of our exposures are concentrated, but overall growth number should be upwards of 5 percent.
Q: According to the recent deposit growth data, the growth is muted at 13.4 percent. We have seen the lending deposit (LD) ratio really peak out- going forward is there any scope right now for bankers to cut deposit rates because quite clearly the transmission of rates is not taking place unless deposit rates come down? What is your call on that?
A: These are all bank specific issues. It is difficult to generalise on the whole bank level. As far as deposit rates are concerned, even today there are banks advertising at 9.1 percent and 9.6 percent. But I think deposit rates have a natural floor at the Post Office deposit rates. Since post office deposit rates are at 8.5 percent, banks would find it extremely difficult to take their own deposit rates below 8.5 percent and at that point the deposit may start leaving the bank.
We moved our deposit rate to 8.5 percent; we probably learnt our lessons and came back to 8.75 percent and that is where the deposit rate resides.
Even though the 10-year bond and the Treasury bill rates have dropped, but since the post office rates which are more important for the retail investors have not dropped, that is why there is some rigidity about the deposit rates.
Q: This time around we have noticed a trend where a lot of banks like yourself have seen a slow down in the top-line. SBI saw its net interest income (NII) de-grow by about 5 percent this time are you noticing a trend where there could be an aggression in terms of growing our loan book at the cost of margins perhaps is this some kind of pressure that you are noticing in the quarters to come as well?
A: Yes, because loan growth or for that matter any volume is a function of price. So, if somebody wants to grow the volumes, they have to be more relaxed on the price. Speaking for us, the Q4 numbers have to be seen in a different context. Our net interest income (NII) was lower compared to the corresponding quarter because the pension fund money moved out to a separate fund. Otherwise, the pension fund was coming as an interest free amount to the bank.
We are still confident of maintaining a net interest margin on domestic business between 3.6-3.7 percent. But as we become more relaxed and start rolling out interest concession in loans, if think at the same time we would expect an improvement in the asset quality.
SBI stock price
On November 27, 2015, State Bank of India closed at Rs 249.55, up Rs 6.80, or 2.80 percent. The 52-week high of the share was Rs 335.90 and the 52-week low was Rs 220.60.
The company's trailing 12-month (TTM) EPS was at Rs 18.32 per share as per the quarter ended September 2015. The stock's price-to-earnings (P/E) ratio was 13.62. The latest book value of the company is Rs 165.49 per share. At current value, the price-to-book value of the company is 1.51.
READ MORE ON SBI, industrial production (IIP) numbers, gross domestic product (GDP), Pratip Chaudhuri, Higher provisions, non-performing assets (NPAs, Know Your customer (KYC) norms violations, Post Office deposit rates, bond portfolio, defined benefit scheme, defined contribution scheme
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