SBI plans to become a global banking giant

State Bank of India (SBI), the country's largest lender, is taking a much bigger stride for its international business and looks all set to grow as a global banking giant. The bank, which has $39 billion worth of outstanding assets in its international book, is planning to double its local lending in foreign markets.

The bank, which has struck deep roots in the domestic market with its inclusive banking plans, will take more exposure in foreign companies -- who have no Indian corporate connections, to garner more local business rather than lending only to Indian subsidiaries and associate companies.

SBI's international loan book, which contributed about 20% to the bank's total net profit, has already seen a surge in local deals. Such deals account for a quarter of its total lending in global markets. A Krishna Kumar, managing director and group executive in charge of international operations of the bank, told dna, "We would like to increase our local lending rather than just lend to Indian companies. We ultimately aim to grow the asset book which would comprise 50% of such local lending."

The bank is also expanding to new geographies like Korea and Milan with a branch and a representative office in Sao Paolo taking its total branches and offices to 193. The bank has 7 subsidiaries in the foreign offices. Arundhati Bhattacharya, chairman, SBI, said in a press conference just a week ago, "We will do a lot more of local funding as we plan to take part of the local risk to expand our presence."

"There is a lot of competition in the international markets for lending, and companies are finding it easy to procure finance," said a senior SBI official. During the second quarter (July-September), the bank's advances grew at a tepid pace of 9.7% year-on-year with domestic advances growing at 6.9% year-on-year and international advances growing at 20% year-on-year.

The official said funding Tata Steel of over $1 billion was a big earning for the bank during the second quarter. "Even in this quarter, we will have a few deals that will see the growth in the international book. We will be closing a deal of $150 million for an oil company."

Angel Broking said in a report, "SBI's SME book grew by just 1% y-o-y while the mid-corporate segment de-grew 3% y-o-y, as companies continue to struggle due to pile-up of receivables and highly leveraged balance sheets."

Deposits outpaced advances with a growth of 14% y-o-y for the quarter. As a result, the NIM went down by 2 basis points (one basis point is equivalent to one-hundredth of a percentage) quarter-on-quarter and 7 bps y-o-y to 3.11% in the quarter under review. Cost of deposits increased by 3 bps q-o-q and 9 bps y-o-y to 6.31%, as term deposits grew faster at 16.1% y-o-y as against CASA deposits growth of 12.5% y-o-y.