SBI will require capital in FY12 or early FY13: Macquarie

India's largest lender State Bank of India (SBI) announced its first quarter results ended June 30, 2011 today. The company posted a 25.3% decline in its consolidated net profit to Rs 2,512.4 crore over the same period last year.

The bank posted a net profit of Rs 3,365.2 crore a year-ago same time. However, total income increased of the company to Rs 39,126 crore in April-June quarter of 2011 from Rs 32,808 crore in the same quarter last fiscal.
Head of financial research at Macquarie Research, Suresh Ganapathy gave his analysis on the SBI results. He told CNBC-TV18 that the accretion rate of non-performing loans (NPLs) at margins could see a slowdown. He said, "SBI had its own set of intrinsic issues; therefore, NPLs have been consistently higher. I don't see any near-term signs of NPAs peaking out for SBI."
Ganapathy feels that SBI should raise capital in FY12 or at the beginning of FY13; otherwise, they will have issue to grow their book. Below is the edited transcript of the interview. Also watch the accompanying video. Q: The capital adequacy ratio has come in at 11.6%. How serious is the issue with regards to SBI, when it comes to raising capital? Is there an immediate urgency or need for SBI to raise capital?
A: SBI has some headroom in tier II base as well as tier I. They can use this for perpetual debt and manage their capital position and growth targets this year. The tier I ratio is at 7.6% that is pretty much lowest amongst all the front line banks, which is a concern. In FY12, they would require capital from the government and if not FY12, then they would need it at the beginning of FY13. Otherwise, will be a big issue for SBI to grow their book. Q: When will the asset quality and non-performing asset (NPA) peak?
A: I don