Last week, Reserve Bank of India Deputy Governor K C Chakrabarty slammed public sector banks for the strange phenomenon of profits dipping when a new chairman takes over.Although the outspoken deputy governor did not name anybody, the hint was clear. It was the State Bank of India which Chakrabarty was referring to.
Last month, the country's largest bank had announced its financial performance for the first time under its new chairman Pratip Chaudhuri.
Its net profit for the quarter ended March 2011 was down 99 per cent from a year earlier, due to the higher provisions made to cover delinquencies in the loan book.
The fourth quarter of 2010-11 was the worst quarter of SBI in more than a decade.
The poor show made investors jittery and they dumped the stock, pulling it down by 7.7 per cent.
Though the most recent one, SBI was just one among many banks with such a chequered history.
Consider this. Five years ago, Prakash P Mallya took charge as chairman and managing director of Vijaya Bank in Bangalore.
In his first press conference, Mallya tried to explain why the bank incurred a net loss of Rs. 34.5 crore (Rs. 345 million) for the quarter ended March 2006 when it earned a net profit of Rs. 155.9 crore (Rs. 1.559 billion) in the corresponding period previous year.
Despite his best efforts, Vijaya Bank's share closed two per cent down that day.
"It was a difficult situation. There were so many accounts where provisions had to be made. I was left with no other option but to take a hit on my profits," Mallya, who retired from Vijaya Bank in 2008 and currently a board member of IFCI, recollects.
A similar story unfolded in Mumbai when Bank of India's chairman and managing director T S Narayanasami retired in May 2009.
In the very next quarter ending September 2009 the state-run lender's net profit halved to Rs. 323.34 crore (Rs. 3.233 billion), prompting brokerages to downgrade the bank's share.
Gross bad loan of the bank increased by Rs. 1,132 crore (Rs. 11.32 billion) sequentially to Rs. 3,919.7 crore (Rs. 39.197 billion) during the quarter. Bank of India's share shed 12 per cent after the financial results were announced.
"Auditors were taking up classification issue (treating loans as non-performing assets)
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