SBH faces Blues ahead of Merger with SBI

There might be just

one more quarter left
ahead of the SBH State
Bank
of
Hyderabad
stops
filing
separate
financial results in the
run-up to the merger
with SBI, like the
other 4 associate
banks of the nation's
biggest
lender.
However, the results filed by the bank for the September quarter have just
denied it a place in history of being a consistently profit making bank since its
inception in the year 1941 or from 1956 when it was first taken over by RBI Reserve Bank of India.
SBH, with a total business of Rs 2.53 lac cr, has registered a whopping Rs
776.64-cr net loss in Q2 of the current financial year. This was because of
steep rise in the incremental provisioning towards NPAs as the State Bank of
India asked the bank to keep inherent weakness in the common loans and
advances also in mind when it comes to provisioning. The SBH officials said
that this was the first time that the bank has ever registered losses in its
history.
The quarterly loss was too big considering the fact that it had reported a net
profit of Rs 1,064.93 cr in the financial year 2015-16. During the first quarter

ended June, 2016 its net profit fell to as low as Rs 28 cr from Rs 251 cr in the
year ago period as provisioning towards NPAs rose to Rs 892 cr from little
over Rs 300 cr in the corresponding previous quarter. The provisioning
requirement ballooned to Rs 2,266.7 cr by the time it concluded the Q2.
Meanwhile, SBI share price was trading 0.52 per cent higher at Rs.258.95 on
the NSE today.
Sources in the bank said that though they cannot rule out some fresh
slippages during Q2, the provisioning made wasnt entirely on account of
these slippages.
Consider a scenario where a company which has received loan from a
consortium of banks (which includes SBI and its associate banks) kept loan
payment up to date with regard to the SBH but defaulted on repayment to the
SBI. The bank was asked to classify loans in all such cases as NPAs for the sake
of provisioning as post merger those loans will have to be reclassified as NPAs
by the SBI as they become 2 loans of a single account, sources said.
In its statement the SBH management said that the net loss was due to higher
loan loss provisioning while the operating profit grew by 36.30 per cent at Rs
1,101 cr as compared to Rs 807.8 cr in the corresponding previous quarter.
These numbers may not matter much to State Bank of Hyderabad (SBH) as it
become non-existent in the next few months. As per bank officials, SBI is likely
to start reporting the financial results together with that of the merged banks
as a single bank from the next financial year.

Disclaimer

The investment advice or guidance provided by way of recommendations, reports or other ways are solely
the personal views of the research team. Users are advised to use the data for the purpose of information and
rely on their own judgment while making investment decision.
Dynamic Equities Pvt. Ltd - SEBI Investment Advisory Reg. No.: INA300002022

Disclosure

Dynamic Equities Pvt. Ltd. is a member of NSE, BSE, MCX SX and a DP with NSDL & CDSL. It is also engaged in
Investment Advisory Services and Portfolio Management Services. Dynamic Commodities Pvt. Ltd., associate
company, is a member of MCX & NCDEX. We declare that our activities were neither suspended nor we have
defaulted with any stock exchange authority with whom we are registered. SEBI, Exchanges and Depositories
have conducted the routine inspection and based on their observations have issued advise letters or levied
minor penalty on for certain operational deviations.
Answers to the Best of our knowledge and belief of Dynamic/ its Associates/ Research Analyst: DYNAMIC/its
Associates/ Research Analyst/ his Relative:
Do not have any financial interest / any actual/beneficial ownership in the subject company.
Do not have any other material conflict of interest at the time of publication of the research report
Have not received any compensation from the subject company in the past twelve months
Have not managed or co-managed public offering of securities for the subject company.
Have not received any compensation for brokerage services or any products / services or any
compensation or other benefits from the subject company, nor engaged in market making activity for
the subject company
Have not served as an officer, director or employee of the subject company

Article Written by
Salman Hashmi