State Bank of India is to bring down its cost-to-income ratio to 46 per cent for merged entity in the medium term, taking into accountthe benefit of saving on expenditure after integration.
Dinesh Khara, managing director (associates and subsidiaries), SBI said the cost-to-income for SBI was 49.5 per cent while for associates it was 52.4 per cent. There will be savings on costs with coming through the closure of administrative offices of associates and rationalisation of branches in the network.
Country's largest lender would have to work to improve productivity by gainfully using the experience of skilled professionals which once worked with associates.
The thrust will be on increase income from fees by selling financial products like mutual funds, insurance policies and investment advisory. This will also help to improve costs to income ratio and returns in the medium term, Khara said told Business Standard on Monday.
The five associate banks — State Bank of Hyderabad, State Bank of Mysore, State Bank of Bikaner and Jaipur, State Bank of Travancore and State Bank of Patiala and Bharatiya Mahila Bank — merged with SBI from April 01, 2017. All these entities will report results on a standalone basis for year ended March 2017.
The merged entity will have a deposit base of more than Rs 26 lakh crore and advances the level of Rs 18.50 lakh crore.
Meanwhile, at the media briefing on merger process, its chairman Arundhati Bhattacharya said the group would transfer data for associates one by one over weekend and process will be complete by May 27, 2017.
Bank will present first results for combined entity for quarter ended June 2017.
The associate banks have made additional provisions of Rs 8,600 crore for non-performing assets as part of clean up before full integration, Bhattacharya said.
The group began work in early 2016-17 to tighten provisioning norms for associate banks, helping to bring them on par with parent (SBI).
Combined losses of associate banks had reduced sequentially to Rs 787 crore in the third quarter ended December 2016 from combined loss of Rs 3,096 crore in the second quarter ended September 2016.
The gross non-performing assets of associates had risen marginally to Rs 52,890 crore at the end of December 2016 from Rs 51,380 crore in September 2016.