After largest banking merger, SBI not ruling out write-offs

The country's largest lender SBI has said write-downs or write-offs on account of the merger of five associates cannot be entirely ruled out.

In the largest consolidation in the banking space, five associate banks and Bharatiya Mahila Bank were merged on April 1 with SBI, putting the lender in the league of top 50 global banks.

SBI is currently in the process of integrating the merged entities' operations with its own to leverage cost and operational efficiencies.

"There can be no assurance that the bank will not have to undertake write-downs or write-offs in connection with the merger, which could have a negative impact on its financial condition and results of operations," said SBI's offer document for the recently conducted Rs 15,000 crore share sale through private placement while highlighting the risk factors. The issue earlier this month was lapped up by foreign as well as domestic institutional investors.

In its annual report (2016-17), SBI had said the long- term benefits of the merger would significantly outweigh the near-term challenges.

"The resulting cost advantage, enhanced reach and economies of scale from this merger will help SBI sustain its mission of being an enduring value creator," it said.

The offer document placed before the institutional investors further said the bank "may also incur additional costs" towards integrating operations and harmonising functions pursuant to the merger.

"In particular, the absorption of over 70,000 employees of the merged entities is expected to increase employee benefit expenses, mainly accruing out of liabilities with respect to provision of additional superannuation benefits," it said.

Prior to the merger, SBI had 2,09,572 employees.

Meanwhile, the country's largest lender State Bank of India (SBI) on Tuesday said it expects to get on board a new partner for its card business in the next three months.

Besides, the bank sees its card business becoming number one in the country in terms of issuance and user base on the back of innovative products and growing number of account holders.

US-based General Electric (GE) has already announced its decision to exit SBI Card as part of its global restructuring exercise.

SBI is in the process of finalising the new joint venture partner, SBI Managing Director Dinesh Kumar Khara said.

"There is process of identifying the buyer and the process is already on. It is in advanced stage. We will be waiting to hear from GE very soon. We expect that to happen maybe in one quarter," he said after launching Prime, a premium credit card targeted at the growing segment of young, urban affluent consumers.

Following the exit, SBI's stake in SBI Card will increase to 74 per cent while remaining 26 per cent will go to the new partner.

SBI Card Managing Director Vijay Jasuja said the company, which has a base of 4.8 million users, plans to double the figure in one year.