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International Journal of Pure and Applied Management Sciences;

Vol. 2016.1.2; pp. 29-35, ISSN: 2456-4516

Statistical Analysis for the Profitability and NPA of


State Bank of India
Dr. Mohammad Miyan
Associate Professor, Shia P. G. College, University of Lucknow, Lucknow-226020.
Date of revised paper submission: 10/12/2016; Date of acceptance: 26/12/2016
Date of publication: 31/12/2016; *First Author/Corresponding Author; Paper ID: MS16206.
Reviewers: Dr. P. N. Mishra; Dr. Shabi Raza (India).

Abstract
The erosion in the profitability was arrested to some extent by robust performance in
the Non-interest income. The Non-interest income increased from 22,576 crore in FY15 to 28,158
crore in FY16 i.e., 24.73% growth. The down fall in the profitability did not adversely impact Net
Interest Rate Margin (NIM) of the Bank. The Bank continued to maintain good NIM of 3.27%. The
Bank was suitably maintaining the margin because of 96 bps improvements in the CASA ratio to
43.84%.The figures are drawn with the help of the table-1. The graph-1 shows that the yearly profit of
the SBI decreases and shows the negative trend. The analysis of various ratios with respect to
different financial years is shown in figure-2. The figure-2 show that the net profit per branch, return
on assets percent and operating profit per branch decreases whereas the expenses per branch
increases. The net margin also shows the negative trend. The Karl Pearsons correlation coefficient of
the variable x and y is calculated with the help of table-2, where x = net NPA% and y = net profit
margin. The value of correlation coefficient is r = -0.85. Hence these two variables are negatively
correlated.
Keywords: NPA, Profitability, SBI.
1. Introduction
The All India Rural Credit Survey Committee proposed the takeover of Imperial
Bank of India and integrating with it, the former state-owned or state-associate banks. So, an Act was
passed in the Indian Parliament in May 1955. As the result, the State Bank of India (SBI) was
established on 1 July 1955. This resulted in making the State Bank of India much powerful because as
much as a quarter of the resources of the Indian banking system were directly controlled by the State.
Later on, the State Bank of India Act was passed in 1959. The Act enabled the State Bank of India to
make the eight former State associated banks as its subsidiaries.
Now India is rapidly advancing towards becoming a first world nation, and today, it is
focusing on the new opportunities such as Smart Cities, Digital India, and Bharat Net etc. As the
result, Indians are increasingly using the social media, internet, and their smart phones to do their
banking. They are demanding an end to end experience and a lot of consistency when doing the
banking via their iPad, smart phones / mobile, or even a computer. Similarly, corporate, SMEs and
public institutions are leveraging the Internet to do their business more economically and efficiently.
New disruptive businesses are altogether redefining how people go about doing routine chores. Not
to be left behind, millions from rural India have become more financially literate and are using the
normal routine banking system to have a more direct relationship with their social benefits and
money. With the Indian economy that is growing more rapidly, India is certainly on towards the Go!
As the biggest bank in India, they are integral to millions of personal lives and thousands of
commercial entities. As the digital economy flourishes, SBI has grown the technology and channel
platforms proportionately, and in more cases, ahead of the curve.
The world economy has passed via a difficult year. The growth in the advanced
economies has stagnated, while that in the emerging and developing world has decelerated, that leads

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International Journal of Pure and Applied Management Sciences;


Vol. 2016.1.2; pp. 29-35, ISSN: 2456-4516
to a slow global growth rate of 3.1% in 2015. The economy of US continues to grow below potential
with the GDP growth down falls to 1.4% in Q4 fourth quarter of 2015 and 1.9% for the whole
financial year. The Euro Area expanded at the rate of 1.6% in 2015, again driven mainly by the private
consumption. However, the economic growth in region has remained unaltered at the rate of 1.6% in
the last three quarters. The disappointing situation persists in the year 2016, with under performance
of service sectors in the UK and Euro-zone and also weak overseas demand taking a toll on the
German factory orders.
As far as the financial volatility is concerned, the role of the emerging markets has
increased with the enhanced spill over from emerging markets to global equity prices and the currency
market developments, recently. The better thing is that after witnessing a tough beginning in 2016, the
market sentiment has revived considerably in recent months. The Indias Economic Scenario Despite
all the headwinds, both external and domestic, the Indian economy remains in the sweet spot and
grew with the rate of 7.6% in FY16 as compared to 7.2% in FY15 and 6.6% in FY14. On Gross Value
Added (GVA) basis, the economy grew by 7.2% rate in FY16 as compared to 7.1% in FY15 and 6.3%
in FY14. This growth is initially driven by the growth in services i.e., 8.9% in the FY16 and in
industry i.e., 7.4% in FY16.
After the two successive years of deficit monsoons, there are the above normal
monsoon this year at 106% of Long Period Average (LPA) will bring cheer. The Ministry of
Agriculture indicate that relatively warmer winter, despite low reservoir levels and a deficient North
East monsoon, Rabi food grains production increased over levels a year ago and even compensated
for the shortfall in Kharif output. Hence, the total food grains production during FY16 i.e., around
252.23 million tonnes are higher over the production of FY15. For FY17, the Government has set the
target of 270.10 million tonnes. The industrial output as measured by the Index of Industrial
Production (IIP) could not sustain the surge in Oct15 and declined after that. The decline in IIP for
the recent months is mainly led by decline in the manufacturing. The introduction of UPI is expected
to have a good impact on the ease of retail payments at the time when the mobile banking is also
picking up. The signs of rising stress in banking system appear to have plateau, as much of stress has
already been recognised and remaining expected stress in coming year identified and put under close
watch. All the possible solutions for the resolution of stressed accounts are being worked out by larger
corporate lenders. These measures are likely to have the positive impact on banking system. Now due
to elevated NPAs, net profits of most of the banks have declined as the result of higher provisioning.
That in turn has impacted their return on assets and return on equity adversely. The year 2015 was
much difficult year for global economy, with economic growth easing to 3.1% as per IMF analysis.
Whereas the growth in advanced economies increased moderately, the Developing Economies and
Emerging Market growth decelerated amidst subdued growth performance in the bigger economies of
Russia, Brazil and persistent slowdown in China. The global growth continued to remain sluggish in
the first quarter of this financial year. Even the Euro zone grew at the same rate as previous quarter
and Japan continues to show weak growth. However, the recent modest increases in commodity prices
and firming up of oil prices have provided support to the global economic activity. According to the
current IMF reports, the world economy is poised to grow at the rate of 3.2% in 2016 and pick up the
rate of 3.5% in 2017. The growth in the developing economies and emerging markets is expected to
come in at the rate of 4.1% and advanced economies are projected to grow at the rate of 1.9%. Against
the backdrop of the weak global economy, India grew at a healthy 7.6% in FY16 as compared to 7.2%
in the last fiscal. Also, on the criterion of Gross Value Added (GVA) basis, the economy grew at 7.2%
in FY16 with respect to 7.1% in FY15. The forecast of above the normal monsoon this year at 106%
of Long Period Average will also support the growth momentum and going forward. The GDP growth
is expected to be better at 7.8% in FY17 (SBI projections). On the external front, the improvement in
present account deficit has persisted and narrowed to 1.3% of GDP in the third quarter of FY16 from
1.5% of GDP in Q3 FY15. Looking ahead, the current account deficit will continue to stay within the
comfortable zone of 1.0%-1.5% even in FY17.

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International Journal of Pure and Applied Management Sciences;


Vol. 2016.1.2; pp. 29-35, ISSN: 2456-4516
2. Data, Graphs and Mathematical Simulations

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*Rs. in Crores

FY-2011-12

FY-2012-13

FY-2013-14

FY-2014-15

FY-2015-16

Interest Earned
(a) Int. /Disc. on Adv/Bills

81,077.70

90,537.10

102,484.10

112,343.91

115,666.01

(b) Income on Investment

23,949.14

27,200.63

31,941.87

37,087.77

42,303.98

(d) Others

1,144.14

1,374.23

1,515.52

2,460.27

5,094.25

Other Income

14,351.45

16,034.84

18,552.92

22,575.89

28,158.36

Interest Expended

63,230.37

75,325.80

87,068.63

97,381.82

106,803.49

Employees Cost

16,974.04

18,380.90

22,504.28

23,537.07

25,113.83

Other Expenses

9,094.95

10,903.52

13,221.57

15,140.57

16,668.54

Depreciation

0.00

0.00

0.00

0.00

0.00

Operating Profit before Provisions and


contingencies

31,573.54

31,081.72

32,109.24

38,913.50

43,257.81

Provisions And Contingencies

0.00

11,130.83

15,935.35

19,599.54

29,483.75

Exceptional Items

13,090.23

0.00

0.00

0.00

0.00

P/L Before Tax

18,483.31

19,950.89

16,173.89

19,313.96

13,774.06

International Journal of Pure and Applied Management Sciences;


(c) Int. on balances With RBI
350.47
545.14
409.31
505.12
621.07
Vol. 2016.1.2; pp. 29-35, ISSN: 2456-4516
EXPENDITURE

Tax

6,776.02

5,845.91

5,282.72

6,212.39

3,823.41

P/L After Tax from Ordinary Activities

11,707.29

14,104.98

10,891.17

13,101.57

9,950.65

Net Profit/(Loss) For the Period

11,707.29

14,104.98

10,891.17

13,101.57

9,950.65

Equity Share Capital

671.04

684.03

746.57

746.57

776.28

Reserves Excluding Revaluation Reserves

83,280.16

98,199.65

117,535.68

127,691.65

143,498.16

Equity Dividend Rate (%)

350.00

415.00

300.00

350.00

0.00

a) % of Share by Govt.

61.58

62.31

58.60

58.60

60.18

b) Capital Adequacy Ratio - Basel -I

12.05

0.00

0.00

0.00

0.00

c) Capital Adequacy Ratio - Basel -II

13.86

12.92

12.96

12.79

0.00

Basic EPS

184.31

210.06

156.76

17.55

12.98

Diluted EPS

184.31

210.06

156.76

17.55

12.98

Basic EPS

184.31

210.06

156.76

17.55

12.98

Diluted EPS

184.31

210.06

156.76

17.55

12.98

i) Gross NPA

39,676.46

51,189.39

61,605.35

56,725.34

98,172.80

ANALYTICAL RATIOS

EPS Before Extra Ordinary

EPS After Extra Ordinary

NPA Ratios :
ii) Net NPA

15,818.85

21,956.48

31,096.07

27,590.58

55,807.02

i) % of Gross NPA

4.44

4.75

4.95

4.25

6.50

ii) % of Net NPA (x)

1.82

2.10

2.57

2.12

3.81

Return on Assets %

0.88

0.91

0.65

0.76

0.46

No Of Shares (Lakhs)

2,577.92

2,577.93

3,091.13

30,911.33

0.00

Share Holding (%)

38.42

37.69

41.40

41.40

0.00

Yield on Fund Advances

0.00

0.00

0.00

0.00

0.00

Break-Even Yield Ratio

7.28

7.20

7.19

7.49

7.29

Cost of Funds Ratio

5.40

5.49

5.51

5.46

5.46

Public Share Holding

PROFITABLITY RATIOS

Net Profit Margin (y)

10.99

11.78

7.98

8.59

6.07

Adjusted Return On Net Worth

13.94

14.26

9.20

10.20

6.89

Reported Return On Net Worth

13.94

14.26

9.20

10.20

6.89

Operating Income Per Branch

7.46

7.98

8.49

9.22

9.75

Operating Profit Per Branch

1.28

1.08

0.93

1.06

1.00

Net Profit Per Branch

0.82

0.94

0.68

0.79

0.59

Personnel Expenses Per Branch

1.19

1.23

1.40

1.42

1.50

Administrative Expenses Per Branch

0.57

0.65

0.74

0.85

0.89

Financial Expenses Per Branch

4.43

5.02

5.42

5.89

6.36

Borrowings Per Branch

8.90

11.28

11.40

12.42

13.36

Deposits Per Branch

73.14

80.17

86.83

95.42

103.12

PER BRANCH RATIOS

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International Journal of Pure and Applied Management Sciences;


Vol. 2016.1.2; pp. 29-35, ISSN: 2456-4516
Table-1
16,000.00
14,000.00
12,000.00
10,000.00
8,000.00
6,000.00
4,000.00
2,000.00
0.00
FY-2-11-12

2012-13

2013-14

2014-15

2015-16

Figure-1 Yearly net profit in crores.


1.6
1.4

Polynomial ()

1.2

Operating Profit Per Branch

1
0.8
0.6
0.4
0.2
0
FY-2011-12

Polynomial (Operating Profit Per Branch)


Net Profit Per Branch
Polynomial (Net Profit Per Branch)
Personnel Expenses Per Branch
Linear (Personnel Expenses Per Branch)
Return on Assets %
Polynomial
on Assets
%)
FY-2012-13
FY(Return
-2013-14
FY-2014-15

FY-2015-16

Figure-2 Analysis of various ratios for last five years.


14
12
10
8
6

Net Profit Margin

Polynomial (Net Profit Margin)

4
2
0
FY-2011-12

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FY-2012-13

FY2013-14

FY-2014-15

FY-2015-16

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International Journal of Pure and Applied Management Sciences;


Vol. 2016.1.2; pp. 29-35, ISSN: 2456-4516
Figure-3 Net profit margin for the various financial years.
2.1 Karl Pearsons Correlation Coefficient
The Karl Pearsons correlation coefficient is given by

r=

( x i x ) ( y i y )
( x ix )2 ( y i y )2

^
y i=a^ + b^ xi
e i= y i ^
yi
xi

yi

( x ix ) ( y i y ) ( x ix )2

( y i y )

( x ix )
( y i y )

^
yi

ei

ei2

1.82

10.99

-0.664

1.908

0.440896

3.640464

-1.266912

12.1933

-1.2033

1.4479308

2.10

11.78

-0.384

2.698

0.147456

7.279204

-1.036032

10.8815

0.8985

0.8073022

2.57

7.98

0.086

-1.102

0.007396

1.214404

-0.094772

8.67955

-0.6995

0.4893702

2.12

8.59

-0.364

-0.492

0.132496

0.242064

0.179088

10.7878

-2.1978

4.8303248

3.81

6.07

1.326

-3.012

1.758276

9.072144

-3.993912

2.87015

3.19985

10.239040

Table-2
We have the following values

x =2.484, y =9.082

( x i x ) ( y i y ) =6.21254
( x i x )2=2.48652
( y i y )2=21.44828
r=

6.21254
=0.85070108 0.85
7.302847197

^ (
b=

xi x ) ( y i y ) 6.21254
=
=4.685173454 4.685
1.326
( xi x )

a^ = y b^ x a^ =20.71997086 20.72
The standard error for regression coefficient b is given as:

S res =

( y i y )2

Se ( b )=

n2
S res

( x x )
i

2.4368
=1.545339819 1.545
1.57687

The test statistics t is given as:

t=

b
4.685
=
=3.03236246 3.03
se ( b ) 1.545

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International Journal of Pure and Applied Management Sciences;


Vol. 2016.1.2; pp. 29-35, ISSN: 2456-4516
3. Results and Discussion
The profitability during financial year was expected to be under pressure due to two
some reasons. Firstly, in which the first reason was a 70 basis points (bps) correction in the base rate
which impacted the interest income of the SBI. The interest income growth moderated to 2.96%
during FY16. Secondly, front loading of the provisioning on account of RBIs Asset Quality Review
(AQR) during Q3 & Q4 also adversely impacted the Net Profit of SBI. Thus, on a standalone basis,
for Q4 FY16, the Operating Profit of the Bank increased by 11.22% from 12,760 crore in fourth
quarter of FY15 to 14,192 crore. For financial year, the Operating Profit increased to 43,258 crore i.e.,
9.41%. The net profit declined by 24.05% from 13,102 crore in FY15 to 9,951 crore in FY16. The
total consolidated profit also declined by 28.1% to 12,224 crore in FY16. However, the erosion in the
profitability was arrested to some extent by robust performance in the Non-interest income. The Noninterest income increased from 22,576 crore in FY15 to 28,158 crore in FY16 i.e., 24.73% growth.
The down fall in the profitability did not adversely impact Net Interest Rate Margin (NIM) of the
Bank. The Bank continued to maintain good NIM of 3.27%. The Bank was suitably maintaining the
margin because of 96 bps improvement in the CASA ratio to 43.84%.
However, in the absolute amount, the deposits grew by 8.4 lakh crore in FY16 as
compared to 8.2 lakh crore in FY15. The muted deposit growth may be due to the rise in the currency
circulation in the system, increasing outward remittances and also the high base effect. Meanwhile,
the credit growth remained in the range of 9-10% in first half of the FY16. After the rate cut by RBI
(i.e., 75 bps in total; 25 & 50 bps in two tranches in the months of Jun15 and Sep15), the banks also
reduced their base rates in the range of 55-70 bps, that helped credit demand to pick up in second half
touching the highest growth of 11.6% in Feb16. Overall, year to year credit grew at a higher rate of
11.3% in FY16 (i.e., 18 March, 2016), as compared to FY15 (i.e., 20 March 2015) growth of 9.0%.
Also under the Jan Surakshsa Yojna, banks have enrolled the total of 12.6 crore
applicants cumulatively, in which SBI alone has enrolled 2.3 crore accounts for the year ending
Mar16. On taking this initiative forward, the Government has been using the banking channels to
disburse the various subsidy amounts through these accounts with the help of using the Aadhaar card.
To further increase the penetration of the financial services in our country, the RBI has issued 23 new
banking licences that include 2 universal banks, 11 Payment Banks and 10 Small Finance Banks, in
2015, with an objective to give banking facilities to the unbanked groups and persons in general.
4. Conclusion
The figures are drawn with the help of the table-1. The graph-1 shows that the yearly
profit of the SBI decreases and shows the negative trend. The analysis of various ratios with respect to
different financial years is shown in figure-2. The figure-2 show that the net profit per branch, return
on assets percent and operating profit per branch decreases whereas the expenses per branch
increases. The net margin also shows the negative trend. The Karl Pearsons correlation coefficient of
the variable x and y is calculated with the help of table-2, where x = net NPA% and y = net profit
margin. The value of correlation coefficient is r = -0.85. Hence these two variables are negatively
correlated.
5. Acknowledgement
The author is much grateful to Mr. S. S. A. Kazmi, General Manager, Shares &
Bonds Department and Economic Research Department, State Bank of India, Corporate Centre,
Madam Cama Road, Nariman Point, Mumbai - 400 021; to provide me the financial data and details
of SBI.
References
1. Husain, S. and Miyan, M., (2016); Mathematical Analysis on the Role of S. B. I. in Indian
Economy, International Journal of Pure and Applied Researches; Vol. 1(1); pp. 57-69.
http://ijopaar.com/files/CurrentIssue/C16103.pdf

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International Journal of Pure and Applied Management Sciences;


Vol. 2016.1.2; pp. 29-35, ISSN: 2456-4516
2. Miyan, M. (2016); Mathematical Analysis on the NPAs of State Bank of India, International
Journal of Pure and Applied Researches; Vol. 1(2), pp. 190-196.
http://ijopaar.com/files/CurrentIssue/22C16109.pdf
3. Indiabulls SBIN, yearly Report; 2016.
http://securities.indiabulls.com/research/companyfundamental.aspx?symbol=SBIN
4. SBI Annual Report, 2016, Annual Report of SBI: 2015-16.
https://www.sbi.co.in/portal/documents/41076/60023/Annual+Report+2015-16.pdf/3985f7556cec-46f4-a79c-9233c4d92237.
5. http://www.iloveindia.com/finance/bank/nationalised-banks/state-bank-of-india.html.

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