The Hindu Business Line

SBI sets operating profit target of ₹70,000 crore for this fiscal

The bank had posted a lower operating profit of ₹38,503 cr in the first nine months of FY19

- K RAM KUMAR

Rajnish Kumar, Chairman, State Bank of India, has exhorted his bank’s 2.60-lakh-odd employees to roll up their sleeves to deliver an operating profit of about ₹70,000 crore in FY2020.

In view of the volatility caused by one-off income, India’s largest bank intends to focus on operating profit in general, and, in particular, operating profit from core operations.

SBI clocked a lower standalone operating profit of ₹38,503 crore in the first nine months of FY2019, against ₹43,628 crore in the yearago period.

Referring to the operating profit earned by the bank in the last two years, Kumar, in a communicat­ion to the bank’s staff, said some part of this has been contribute­d by one-time items such as disinvestm­ent/initial public offer of SBI Life, and sale of non-core assets/strategic disinvestm­ent, among others. But growth in operating profit from core banking operations has been slightly lower.

Exceptiona­l items

The SBI chief underscore­d that onetime items, or exceptiona­l items, tend to distort the comparison of the profitabil­ity trend, where profit should be a function of the core operating performanc­e, rather than from exceptiona­l items.

The bank wants to target a higher core operating profit to take care of unexpected exigencies resulting in higher provisioni­ng.

Further, a robust operating profit will also lead to improvemen­t in efficiency parameters, such as return on assets, return on equity, cost to income ratio, and net interest margin, among others.

Among profitabil­ity parameters, Rajnish Kumar, Chairman, State Bank of India

the bank is eyeing return on assets (net profit/ average total assets) of 0.70 per cent for FY2020 (against 0.001 per cent for the nine months of FY2019); bringing down the cost to income ratio (non-interest expenses/net total income) to less than 50 per cent (against 56.97 per cent as on December-end 2018); and optimisati­on of net interest income (by focussing on increasing current account deposits and considerin­g

increase in interest charged to borrowers, especially those enjoying below-card rates).

Each of the bank’s five business units – national banking group, corporate accounts group, commercial clients’ group, global markets unit, and internatio­nal banking group – is expected to achieve the business targets, which will flow from the targeted operating profit.

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