Our transformation strategy going forward will focus predominantly on five areas:customer service corporate credit revamp digitisation of banking operations synergybetween subsidiaries and human resource.
It gives me great pleasure to place before you the highlights of yourBank's performance during the financial year 2018-19. Details of the achievements and initiatives takenby your Bank are provided in the enclosed Annual Report for the year 2018-19.
After picking up pace in 2017 global growth moderated to 3.6% in 2018with both the developed and the emerging markets witnessing slow growth. Fiscal support inthe form of US$1.5 trillion tax cuts and enhanced Government spending enabled the USeconomy to advance strongly. However the protectionist policies by the US uncertaintyover Brexit and slowing GDP growth in other advanced economies including Euro Zone Japanthe UK Canada accentuated the slowdown. Meanwhile continued easing in China's GDPgrowth also pulled down overall growth of the developing world.
The financial markets also witnessed increased volatility in 2018. Oil pricesremained volatile throughout the year. However with supply cuts by OPEC and sanctions bythe US on Venezuela and Iran crude prices are now showing an upward bias. Financialvolatility that eased somewhat after the adoption of dovish stance by the Fed hasincreased recently amidst enhanced trade tensions between the US and China. Looking aheadglobal economic growth is expected to decelerate to around 3% in 2019.
Against this backdrop India is still a beacon of growth. Structuralchanges such as IBC and stabilisation of GST are expected to provide impetus to economicactivity. Low inflation accommodative monetary policy and Government income support tofarmers are also likely to support domestic economic activity. However prolonged US-Chinatrade war and rise in oil prices remain the key risks to growth momentum.
YOUR BANK'S PERFORMANCE
In the year FY19 your bank's total deposits grew by 7.58% to`2911386 crore from the previous year's level of `2706343 crore. The domesticdeposits grew by 8.27% while there was a contraction in deposits of foreign offices by 9.17%due to the formation of subsidiary State Bank of India (UK) Ltd and transfer of theBank's existing business to the same. The growth in domestic deposits was mainly dueto robust growth in CASA deposits which grew by 8.42%. The Bank's overall CASA ratioimproved from 45.68% in FY18 to 45.74% in FY19.
After a significantly low credit growth in the last couple of years the bankingindustry's credit growth has picked up in FY19 due to a strong revival in credit tocorporate sector driven largely by Government investment and continued demand frompersonal loan segment. In line with the ASCBs double digit credit growth your bank'sdomestic advances grew by 13.99% to `1990746 crore while the foreign offices advancesgrew by 0.23% to `302708 crore. Therefore the gross advances of your Bank grewby 11.96% to the level of `2293454 crore by March 2019 from the previous year level of`2048387 crore. The credit to corporates increased by 14.83% to `851638 crore in FY19and major share of the credit went into sectors such as Infrastructure (Power Roads &Ports) and Services especially NBFCs. The corporate and NBFC credit growth was mostlydriven by either PSUs/Govt. sector or the GoI undertakings.
With the revival of credit to corporates the share of Retail segment(Personal SME & Agri) in the domestic loan book declined marginally to 57.22% from57.53% last year. Much of the growth in domestic advances came from Personal segmentincluding Home Loans. Overall the Personal loans showed a robust growth of 18.52% inFY2019 which is in line with the Bank's strategy towards this segment. Withinretail Home loans and Xpress credit grew substantially by 17.41% to `400377 crore and40.79% to `104906 crore respectively in FY19. The growth in Xpress credit is mainlydriven by our YONO and INB platforms.
Your Bank's home loan portfolio now constitutes around 62% of thePersonal loans. Additionally your Bank continues to be the largest home loan provider inthe banking sector with a market share of 34.51% as on 31st March 2019 amongstASCBs.
Your Bank's investment portfolio has declined to `978124 crore(domestic portfolio was `926651 crore and foreign portfolio was `51473 crore) in FY19compared to `1073097 crore in FY18 due to pick up in corporate lending coupled withcalibration of term deposit rates to ensure a more optimal Asset Liability structure.
With a view to build and ensure customer convenience at all times theBank has created a large network of touch points. The Bank has 57467 operating BCs over22000 branches and 58415 ATMs including 7658 Automated Deposit & WithdrawalMachines (ADWMs). More than 36% of the financial transactions of your Bank are routed through ATMs/ADWMs. On anaverage over 1.4 crore transactions per day are routed through your Bank's ATMnetwork.
Your Bank's first global footprint was with the branch of Bank of Madras in ColomboSri Lanka in July 1864 (first amongst Indian banks). With presence across all time zones through208 offices in 34 countries State Bank of India has gradually spread its wings across theglobe and has become a pioneer of International Banking among the Indian PSBs. DuringFY2019 your Bank has endeavoured to consolidate and strengthen its overseas operationsand in line with our growth strategy in SAARC region Nepal SBI Bank Limited a subsidiaryof State Bank of India has opened 10 offices. Furthermore 12 retail branches of UK were carved out from yourBank's UK operations to form the overseas Subsidiary-State Bank of India (UK)Limited.
TECHNOLOGY AND INNOVATION
A steady stream of technology driven innovations necessitated bychanging customer preferences is transforming the retail banking landscape. State Bank ofIndia has a multi-channel delivery model which allows it to offer its customers a choiceto carry out transactions through any channel at any time and at any place. In FY2018-19your Bank has increased its offerings across various channels - digital mobile internetsocial media along with additions to its branches ATMs and Customer Service Points.
The digital offering YONO is expected to bring a paradigm shift interms of customer convenience through more efficient deliveries at lower costs andgreater reach for the Bank. The digital application is steadily strengthening in terms ofreach as well as value. YONO caters to various banking & financial services as well aslifestyle requirements and delivers world class customer experience through distinctiveomni-channel and seamless customer journeys. YONO has achieved 2 crore downloads andaround 73.49 lakh registered users. Over 10 lakh users log in daily and around 25000digital accounts are opened per day which is over 75% of all eligible accounts beingopened by the bank with 30-40% higher balances than regular accounts.
With 29.67 crore active Debit Cards as of March 2019 your Bankcontinues to lead in Debit Card issuance in the country. Additionally your Bank haslaunched various innovations and functionalities around Debit Cards such as ContactlessDebit Cards Bharat QR Samsung Pay Visa Checkout and Personalized Image Debit Card"My Card".
Your Bank has set up over 2200 e-Corners across the country wherecustomers can avail the entire gamut of services through ATMs ADWMs SWAYAMs Checkdeposit Kiosk and online banking kiosk.
To ensure safety of ATMs and customers coverage under electronicsurveillance is being enhanced. Your Bank has covered approximately 13000 ATMs undere-surveillance as on 31st March 2019 while process for 15000 ATM sites isslated to commence shortly.
Your Bank has installed around 3200 SWAYAMs (Barcode based PassbookPrinting Kiosks) during FY2019 taking the total number of SWAYAMs deployed to 17400units. Your Bank has also deployed "Through the Wall" SWAYAMs offering extendedworking hours for printing. More than 3.45 crore transactions are recorded at these kiosksper month.
Green Channel Counters (GCC) installed at all retail branches extendservices such as cash withdrawal cash deposit funds transfer within State Bank of Indiain addition to balance enquiry and Mini Statement. On an average 8.20 lakh transactionsare being routed through GCC per day.
Your Bank's Uni_ed Payments Interface (UPI) based App is aninteroperable offering which provides the convenience of transferring funds acrossdifferent Bank accounts using Virtual Payment Address (VPA) Bank Account Number + IFSCand scanning a QR Code. Over 553 lakh users have registered and are availing UPI servicesresulting in more than 129 crore transactions amounting to more than `2.96 lakh croreprocessed through the SBI UPI channel during FY2018-19.
With the introduction of new features and several add-ons provided onthe Onlinesbi' to enhance customer comfort and experience the platform handledtransaction volume exceeding 162 crore with transaction value of nearly `127.78 lakhcrore recording a quantum jump over the last year. This reflects the growing customerconfidence in our offerings and deliverables.
A unique facility YONO-Cash' has been made available to ouresteemed customers for card-less cash withdrawal through ATM using YONO app.
The FY2019 has been a year of reversal of the negative trend and hasbrought about significant improvement on asset quality front provision coverage NIM andyield on advances. This coupled with reduction in cost of deposits and overall control onthe overheads has been a significant improvement over the previous years. The profit of the Bankcould have been much higher but for the provisions mark to market losses on Governmentsecurities leading to fall in trading income and pension and enhanced provision ongratuity payable to employees.
The Net Interest Income of the bank stood at `88349 crore registeringa healthy growth of 18.03%. The growth is owing to focused efforts in retail creditcorporate credit as well as control in slippages thereby resulting in good growth underinterest income and a simultaneous control on interest expenses by CASA oriented depositaccretion. The Operating Profit of the Bank stood at `55436 crore. The Bank made a standalone profit of `862crore and consolidated profit of `2300 crore.
During the year the domestic bond yields have seen volatile movementsdue to unpredictable crude oil prices US sanctions on Iran US dollar movements thetrade tensions between US and China and other geo-political risks which captured theheadlines for major part of the year. The relatively high domestic interest rates alsoadded to the hardening of G-Sec yields. All these factors led to a fall in trading incomeand MTM losses eventually impacting the Non-interest income. The Recovery in Written-OffAccounts however registered a robust growth of 57% and the trend is expected to continuewith better recoveries in FY2019-20.
On the cost front the Bank has been very conscious in controlling theoverheads and strong awareness has been created across the branches and offices of theBank. As a result of the ongoing measures of cost optimisation the increase in overheadswas restricted to below 7%. Staff expenses is another major head which recorded anincrease of 23.74% during FY19 but that is on account of higher growth in largely onetime provisions made for employees.
Steep growth in provisioning due to rise in stressed assets in FY18 hadpushed the profitability of the Bank into negative territory. However concertedefforts toward recovery in stressed assets and strict monitoring were undertaken in FY19.While the gross NPA ratio of the bank fell to 7.53% in March 2019 from 10.91% the previousyear the net NPA ratio of the Bank also declined by 272 bps to 3.01% in March 2019.
The all-round effort in managing stressed accounts in FY19 resulted inthe fresh slippages being contained to `32738 crore a reduction of 65.5% from previousyear through strict monitoring. Recoveries and upgrades during FY19 more than doubled fromlast year's level of `14530 crore to `31512 crore in March 2019. NPA ratiosdeclined in all segments with corporate segment registering the steepest decline. The NPAin corporate segment declined from 21.92% in FY18 to 13.62% in FY19.
Despite the ups and downs the average recovery rate in stressedaccounts under the NCLT route was in excess of 60%.
The capital adequacy of the Bank improved during the financial year onthe back of better Capital planning including raising of additional Tier I as well asTier II capital some amount of internal resource generation and containment of risk intrading and banking books. Accordingly the Credit Risk Weighted Assets (RWA) on Advancesto Gross Advances ratio of the Bank declined to 56.60% in March 2019 from 60.66% in theprevious year. The Total RWA to Total Asset ratio also declined by 2.34% to 52.37% inMarch 2019. The modified duration of the AFS portfolio was also reduced to 2.62 years inline with evolving risk to conserve capital.
The Bank raised AT1 Bonds to the tune of `7317 crore in FY19. This wasfurther supplemented by raising of `4116 crore of Tier II Bonds.
The combined impact of above efforts saw the capital adequacy positionof the Bank improving from 12.60% in March last year to 12.72% in March 2019. The Tier Icapital and AT1 capital ratios put together increased by 29 bps to 10.65%. Withsatisfactory recoveries under NPA accounts lined up going forward and slowdown in freshslippages internal accruals are expected to support normal credit growth during FY20.However Bank retains the option to raise capital at an opportune time to build a suitablebuffer to support higher than expected credit growth as well as risk absorption capacity.
During FY19 your Bank has undertaken certain strategic initiatives togive an additional thrust to each and every business segment of the Bank. Some of theimportant initiatives are as under:
Your Bank has conducted amass communication program Nayi Disha Phase 1 for all the employees to improve thecustomer centric approach in the Bank. The Bank has also revised the assessment ofcustomer satisfaction measures redesigned customer service index' withweightage to critical parameters. To revamp the corporate credit structure and systems the Bank hasstrengthened the credit risk process and credit review process independent of theAppraisal/Sanction process. The credit risk function has been strengthened by onboardingsector specialists and improved due diligence. In HR the Bank has takensubstantial efforts in identifying potential leaders and developing them throughcustomized training programs to create leadership pipeline. With this your Bank wasranked top among the PSBs in EASE Index for "Developing Personnel for BrandPSBs". Additionally your Bank's performance management system CareerDevelopment System (CDS) has now made 95% of the roles measurable. Toincrease the reach of its subsidiaries your Bank is at the forefront in driving CrossSell Products of the subsidiaries. The Bank expects cross selling income to grow more than50% over the medium term for which your Bank has initiated a CRM Platform for SBGentities (Project IMPACT) to leverage data analytics for lead generation by leveraging thetechnology enablers in the bank. The Bank is also training more and more officials/employeesand encouraging them to acquire the professional certification to cross sell products. Your Bank has introduced niche products such as SBI Smart Home Top-Up' forexisting Home loan customers SBI Wealth' for HNI/High-end customers andFlexible Margin Schemes for real-estate developers. Your Bank has started anIFSC Banking Unit (IBU) at International Financial Services Centre (IFSC) located at theGIFT-SEZ Gandhinagar Gujarat. This centre aims to provide suitable regulatory regime andcreate a business environment to attract talent and capital. As a responsiblecorporate citizen your Bank has taken several initiatives for a better and cleanerenvironment. Under the Green initiative and cleanliness drive your Bank has discontinuedprinting of transaction slips for 43 types of unsuccessful transactions. It has installedsolar panels on around 2400 ATM sites. Your Bank intends to become a plastic freeorganisation by 2nd October 2019 as part of Bank's sustainabilitycommitment. This major initiative by your Bank is in sync with the Honourable PrimeMinister's Swachh Bharat Abhiyan and the national commitment to abolish single useplastic by the year 2022.
Through its subsidiaries SBI provides a wide gamut of financialservices to its customers. The growth exhibited by the subsidiaries has been healthy yearafter year.
SBI Capital Markets Limited posted a PAT of `168.19 crore on astandalone basis for FY19 against `236.26 crore in FY18 whereas on a consolidated basis ithas posted a profit of `236.73 crore as against `323.53 crore in the previous year.SBICAP Securities Limited a subsidiary of SBI Capital Markets Limited has booked grossrevenue of `408.36 crore during FY19 as against `357.56 crore in FY18.
SBI Life Insurance has continued to maintain the leadership positionamongst private players in the number of policies issued which reflects mass coverage andstrong market acceptance across geographies amongst life insurers. The Company recordedPAT of `1327 crore in FY19 against `1150 crore in FY18.
SBI Cards and Payment Services Private Limited delivered PAT of `788crore for FY19 vis--vis `581 crore in FY2018. The company is positioned at Rank 2 with17.2% Spends share and 17.4% Cards base. SBI Funds Management Private Limited the AssetManagement Company (AMC) of SBI Mutual Fund is one of the fastest growing AMCs withgrowth of 7.36% against the industry growth of 3.66% in FY19. It has posted PAT of `428crore during FY19 against PAT of `336 crore during FY18.
SBI General Insurance Company Limited (SBIGC) recorded 32.83% growth inGross Written Premium YoY against an industry growth of 12.95%.The PAT has increased to`334 crore for FY2019 vis--vis `265 crore (excluding onetime reinsurance income fromFire business) in FY2018. The Company's market ranking stands 13th in theindustry and 8th among the private players in FY2019.
SBI Global Factors Private Limited a leading provider of factoringservices for domestic and international trade displayed turnover of `4387 crore for FY19as compared to turnover of `3555 crore in FY18. SBI Pension Funds Private Ltd one of thePension Fund Managers (PFM) to manage the pension corpus maintained lead position amongstPFM in terms of Assets Under Management (AUM) in both Government and Private Sectors. Thetotal AUM of the company as on 31 March 2019 was `121959 crore (YoY growth of 37%)against `89283 crore on 31 March 2018.
RECOGNITION & AWARDS
Your Bank has over the years garnered numerous awards and accolades andthis year was no different. Your Bank was rated the Best Transaction Bank in India by"The Asian Banker" for the second time in a row. Your Bank was awarded as"The Best Trade Finance Bank (India)-2019" for the eighth consecutive year byGlobal Finance Magazine. Your Bank received "Green Bond Pioneer Award" for beingthe largest new emerging markets Certified Climate Bond issuer of 2018 by Climate Bond Initiative. Your Bankwas also awarded Best MSME Bank Award-Large bank' by CIMSME. YONO our digitalinitiative won the "Mobile Banking Initiative of the Year - India" at the AsianBanking and Finance Retail Banking Awards Singapore and ET BFSI Innovation Awards amongmany others. At the Asian Banker Financial Technology Innovation Awards 2018 SBI receivedawards in a number of categories including The Risk Data and Analytics TechnologyImplementation of the Year for OFSAA.
Among the subsidiaries SBI Cards won the Excellent CompliancePerformer Award 2018' at the coveted Compliance 10/10 awards. SBI General has beenconferred the title "General Insurance Company of the Year" at the IndiaInsurance Summit and Awards 2019 which is the biggest strategic business summit for theentire insurance industry in India.
CORPORATE SOCIAL RESPONSIBILITY
Social Responsibility is deeply ingrained in the culture of your Bank.Consequently Your Bank has been undertaking social welfare initiatives much before theformal CSR concept was coined. The Bank believes that it owes a solemn duty to the lessfortunate and underprivileged members of the society to make sustainable social change intheir lives. State Bank of India always places the interest of the common man especiallythe most marginalised at its core. In addition to this the Bank earmarks 1% of theprevious year's net profit as the budget for CSR spend for the year. Its CSR activities arewidespread and deep-rooted and have made a true difference in the lives of millions fromunderserved communities. The Bank is committed towards the economic and social wellbeingof the downtrodden.
During the year the Bank has made donation of an amount of `5 Croretowards Chief Minister Distress Relief fund Kerala for _oods. Apart from that Bank hasalso donated an amount of `1.24 crore under CSR mainly towards Healthcare and Sanitation.
ENVIRONMENT AND SUSTAINABILITY
State Bank of India is committed towards environment protection and toreduce its carbon footprints. Hence your Bank prioritises responsible interaction withenvironment to avoid depletion and degeneration of natural resources to maintain its longterm quality. Some of these initiatives are:
Waste to gold: An initiative to motivate and develop the skills ofvulnerable youth to address waste management in the city; and develop small sustainablebusinesses for their livelihood.
SBI Corbett: An initiative to provide villages a sustainable wastemanagement system and conduct trainings of SHG Workers to spread awareness in nearbyschools and hotels.
Swachh Belur Math: SBI Foundation supported Ramkrishna Mission forconstruction of 201 toilets at new Pilgrims Abode in Belur Math that will serve 13 lakhvisitors each year by contributing `1.67 crore to this project.
Beat Plastic Pollution: State Bank of India's Local Head Office (LHO)Mumbai organised Cleanliness Drive with the theme Beat Plastic Pollution' onthe eve of "World Environment Day" at Dadar Beach. More than 125 staff membersactively participated collecting 2 tractor load of garbage.
FY20 in all respects will be a turning point for your Bank. Not onlywill the financials improve going forward efforts will also be directed to achieve a moresustainable mix of business both domestically and in overseas operations.
Taking cues from the last year the Bank has set the goal to achieve ahealthy credit growth of 10-12% in FY2020. To an extent the credit revival and recoveriesin FY19 have already set the tone and the Bank is confident of achieving the target setfor FY20. It was envisaged last year that growth in business will be achieved by portfolioreordering that will reduce the Credit RWA to Total advances ratio and internalreorganisation of the corporate banking. My message this year highlights the progress inthe revival strategy.
However a sustainable recovery is not just a mechanical arithmetic butit also requires deep structural transformation and strategic shifts in portfolio. Such anexercise should ultimately improve the RoA minimise asset liability mismatches and reducethe payback period of our investments. Accordingly our transformation strategy goingforward will continue to focus predominantly on five areas: Customer Service CorporateCredit Revamp Digitisation of Banking operations Synergy between subsidiaries andDevelopment of our human resource.
The Bank already has a large customer base in every business segment.The benefits of retaining the existing customer base far outweigh the cost of acquiring new.Accordingly in the coming year the Bank will roll out revised customer satisfactionmeasures to gauge customer satisfaction. Our unique training programme - Nayi Disha-Phase 2' will be focusing on a customer centric approach for employees thus linkingour human resource training with customer service.
The Corporate Credit area had attracted considerable attention in thelast two years. Revamping of Corporate Credit structure and system within the Bank onlines that will widen the universe of clients and focus on new segments has already beeninitiated and the results are visible. Strengthening of credit processes and increasedproduct penetration across high priority relationships has been and will be our guidingprinciple going forward. Defficiencies in human resource if any will be mitigated and humanresources will be strengthened by on-boarding sector specialists.
The use of technology in delivering banking services has become morebroad-based. The Bank is already in leadership position in digital channels ATMs andmobile banking. Asset and liability side product offerings through the YONO platform willbe scaled up. Encouraged by successful implementation of e-DFS our Dealer Finance Schemewe shall try more technology enabled products for our esteemed corporate clients.
Our subsidiaries have leading market share in their respective productsand services. Going forward your Bank will explore technology options to leverage upon thesynergies with subsidiaries for distribution of Life and General Insurance Mutual FundsCredit Card and Demat Account ensuring instant Customer satisfaction.
I thank all our shareholders for their continued faith in our strengthand capabilities our customers for their valuable support and trust and our employees fortheir tireless efforts towards achieving our goals.
"Alone we can do so little; together we can do so much". -HellenKeller