Why SBI group banks' profit fell by Rs 11,984 crore

the asian age

Business, Companies

Five associate banks that have got merged with SBI reported losses affecting parent bank.

State Bank of India ATM.

Mumbai: State Bank of India has merged its five associate banks -- State Bank of Jaipur and Bikaner, State Bank of Hyderabad, State Bank of Mysore, State Bank of Patiala and State Bank of Travancore -- with it self.

The merger has brought India's largest public sector lender in the league of world's top most lenders with SBI getting 45th rank globally and a huge post-merger assets value.

A report in The Economic Times said that consolidated numbers of the bank were not up to the mark and were not as per the expectations of the market. "SBI group net profit fell from Rs 12,225 crore in FY16 to Rs 241 crore in FY17," the report said adding "largely because of losses reported by the five associate banks."

The report flags concerns that merger of five sister banks from April 1, 2017 with the parent SBI would be a cause of worry. "The consolidation would also affect the net worth, capital adequacy, and outlook for future provisioning requirements," ET quoted an ETIG study as saying.

It may be noted that SBI has not made earnings of its associate banks for the fourth quarter ended March 31, 2017. "Five sister banks had already reported a cumulative loss of Rs 5,905 crore in the first nine months of FY17," the report added.

Based on the earlier performance card, markets fear that five associate banks may come up with a Rs 6,000 crore loss for the fourth quarter in financial year 2016-17.