The Banking and Strategy Initiative

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State Bank of India : The red EMU that flew over the seas

Our literatteur in mint residence has outdone himself for a change. Tamal’s work for Bankers’ Trust[a serious column on page 6 of monday’s mint] that was mostly a shadow of [yet tbd] in mint has exposed reference data services from bigger financial research providers for what even an academic can provide from an inside track of things at SBI. The behemoth in question suddenly sprung a huge shock this quarter in results, while 20 years of reference data building still had us all wrapped in knots [pun unintended, if you caught mexican chilli here].

With excess cash of $10B and a capital raising of $4B in the year, SBI is unremunerative losing nearly $1.69B in opportunity cost apart from added leverage being lost because of high gross NPAs of $4.2B. The new incumbent in the Chairman’s office is due inMarch, with the two remaining MDs also leaving within the year. Though in PSEs it is well nigh impossible to have a better situation on the ground, upcoming consolidation with associates and high unproductive staff costs that have pushed cost income ratios to an all time high, mean the extreme risk of a down spiral within the bank leading from the latest results being probable [ risk in double digits ]

The augean stables are as they were two decades and a restructuring earlier, the bank like India’s power PSEs forcing government to show its socialist hand and due largesse in regulation to make this species fly again as the other one inEurope gets ready for a big nursing stay at the German hospital.

state bank of india results disappoint; bank results season

2 comments on “State Bank of India : The red EMU that flew over the seas

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    July 27, 2011

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    August 8, 2011

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