Tides of 26.07.2008

1. Life Insurance Corporation of India (LIC) appears to have made some value buying in the last quarter, when many blue chips lost heavily from bear hammering. The Government-owned insurance company, which is a major player in the equity market, increased its stake in the Sensex stocks during April-June quarterLIC raised its stake in 22 Sensex companies, during the June quarter, according to a study on the Sensex companies’ public shareholding of more than 1 per cent.

2. Borrowing abroad doesn’t seem to be that attractive now for Indian companies. Data released by the Reserve Bank of India show that there has been a steep drop in the number of companies borrowing abroad as well as the amounts they borrowed outside during the first quarter of this fiscal.Eighty eight companies have borrowed nearly $4 billion (or about the equivalent of Rs 16,000 crore) through external commercial borrowings (ECBs) during April-June 2008. In the corresponding quarter of the previous fiscal, 195 companies had borrowed $8.5 billion abroad. And for the full fiscal, the amount borrowed abroad was about $31 billion.Asked about the reasons for the drop in external commercial borrowings, Mr V. Krishnaswamy, General Manager, Indian Overseas Bank, said, “Companies are probably prepaying some of their borrowings. Earlier there was a penalty for such prepayment but that has now been lifted. Secondly, with six month LIBOR (London Inter-bank offered rate — the benchmark rate for external borrowings) at about 3.4 per cent and a maximum spread of about 3.5 per cent over LIBOR for ECBs beyond 3 years, the borrowing cost is nearly 7 per cent.

3. Union Bank of India reported a flat net profit of Rs 228 crore for the quarter ended June 30, 2008, against Rs 225 crore in the same quarter last year. According to the bank, the profit would have been higher but for the sharp depreciation in its investment portfolio. The bank made a marked-to-market provision of Rs 339 crore on its bond portfolio for the quarter. Total deposits grew by 23 per cent, while advances grew by 19 per cent. Treasury income was substantially lower at about Rs 8 crore (Rs 34 crore).

4. The merger of State Bank of Saurashtra with the State Bank of India is likely to be completed in three months, said Mr O.P. Bhatt, Chairman, State Bank of India. He was speaking to reporters on the sidelines of the second RK Talwar Memorial Lecture. Mr Bhatt said that this merger would help the group understand the dynamics of the merger process.

5. Net bank credit increased by Rs 16,132 crore to touch Rs 24,08,579 crore for fortnight ended July 4, according to the Reserve Bank of India’s Weekly Statistical Supplement. The total bank credit comprised food credit, which increased by Rs 574 crore to touch Rs 50,721 crore and non-food credit, which increased by Rs 15,558 crore to touch Rs 23,57,859 crore.

6. Karnataka Bank Ltd has registered a decline of 60 per cent in net profit at Rs 20.70 crore in the first quarter of 2008-09 as against Rs 51.79 crore in the corresponding period of the previous fiscal. Speaking to Business Line, after the board meeting here on Friday, Mr Ananthakrishna, Chairman and Chief Executive Officer, attributed the fall to the provision for depreciation in investments. The bank provided around Rs 101 crore for this. It has an investment portfolio of around Rs 6,000 crore, he said. The net interest income stood at Rs 140.78 crore (Rs 124.4 crore), a growth of 13.16 per cent. Other income stood at Rs 49.83 crore (Rs 41.78 crore).

7. Karur Vysya Bank’s net profit slipped to Rs 30.54 crore during the first quarter of the current fiscal, against Rs 47.95 crore during the corresponding quarter of the previous fiscal.
The bank has attributed the drop to the Rs 49-crore provisions made towards depreciation on investment in Government securities. Besides this, the bank has also made provisions for non-performing assets and other provisions as per the RBI guidelines. “But this is less than Rs 1 crore,” a bank official told Business Line.The operating profit rose by 20.72 per cent to Rs 79.95 crore (Rs 66.23 crore). The total interest income during the quarter increased by 28 per cent to Rs 327.67 crore (Rs 256.18 crore) and the interest on advances grew 31.15 per cent to Rs 253.93 crore (Rs 193.62 crore). Other income stood at Rs 48.73 crore.The bank’s total business increased to Rs 23,032.23 crore (Rs 17,212.76 crore), with deposits accounting for Rs 13,145.18 crore (Rs 9,998.40 crore) and the remaining Rs 9,887.05 crore (Rs 7,214.36 crore) for advances.

8. Aided by an increase in interest income, IndusInd Bank’s net profit increased to Rs 19.10 crore in the first quarter of 2008-09, up 44.48 per cent, from Rs 13.22 crore in the previous year’s corresponding quarter.For the period under review, the bank’s net interest income grew by 79 per cent to Rs 102.80 crore due to re-pricing of loan books and reduction in cost of deposits.

9. After a marginal rise last week, the country’s foreign currency reserves fell by a huge $1.413 billion to touch $307.107 billion, during the week ended July 18, according to the Reserve Bank of India’s Weekly Statistical Supplement. In the previous week, forex reserves had increased by $123 million to $308.520 billion. The fall in reserves is probably because the RBI was selling dollars directly to oil companies, in exchange for oil bonds, said a senior treasury official with a public sector bank. The week under consideration also saw very little FII inflow, which is also reflected in the lower reserves, he said.

10. If you receive an unsolicited credit card, you can now make your bank pay for the inconvenience caused to you. The bank issuing the card will not only have to pay a penalty to the Reserve Bank of India, but also offer monetary compensation to the customer.
The RBI on Thursday issued a circular, which lists out a series of dos and don’ts about the protocol that will have to be maintained in the case of credit cards.The circular says that if an unsolicited card is issued , activated and billed for without the consent of the customer, the card issuing bank will not only have to reverse the charges, but also pay a penalty amounting to twice the value of the charges reversed.Additionally, help is also at hand from the banking ombudsman who will determine the amount of compensation payable for the loss of the complainant’s time, expenses incurred, harassment and the mental anguish suffered by him.The bank will also be held responsible if a card is misused before it reaches the customer. “It is clarified that any loss

arising out of misuse of such unsolicited cards will be the responsibility of the card issuing bank only,” the RBI said.Foreign currency assets fell by $1.415 billion to touch $ 297.371 billion. Foreign currency assets expressed in dollar terms include the effect of an appreciation or depreciation of non-US currencies, such as euro, sterling and yen. The week under review saw the euro depreciating from $1.5857 to $1.5838. According to figures from SEBI, the net FII inflow was just $5.4 million during the week. Gold and SDRs were unchanged at $9.208 billion and $ 11 million respectively. The country’s position in the IMF increased by $2 million to touch $517 million.

Tides of 14.07.2008

1. Axis Bank’s net profit increased 88.6 per cent at Rs 330.14 crore in the first quarter ended June 30, 2008 compared with Rs 175 crore in the corresponding quarter of previous fiscal year. The total business grew by 44 per cent to Rs 1, 13,660 crore.

2. IFCI’s top management on Monday said that the idea of inducting a strategic investor in the company had not been abandoned. It was, however, made clear that any such process could begin only after the issue on ‘convertibile debentures’ was sorted out. The earlier process, initiated in October 2006, for inducting a strategic investor, cannot be revived from where it was left as both the market as well as the company’s condition had substantially changed ever , an official said.

3. Profits will be under pressure in the first quarter due to treasury losses on account of rising bond yields, said Mr M. V. Nair, Chairman and Managing Director, Union Bank of India. “It will not be possible to register the kind of profit growth we had seen earlier. Marked-to-market losses will affect profits,” he said on the sidelines of a press conference to announce a joint venture for asset management, here on Monday.Given the current high interest scenario, banks’ margins will be under pressure, Mr Nair said. Union Bank may find it difficult to maintain the 25 per cent growth in profit for the 2008-09 fiscal, as targeted earlier, he added.

4. Several loan-seekers from banks are finding themselves in a tricky situation as they are being asked to go in for an insurance policy to enhance the ‘chances’ of loan approval. The policy is on the life of the borrower against accident and other risks.The sale of insurance by banks is seen more in the case of those banks that have an insurance arm of their own or that are marketing the products of an insurance provider, according to sources. While some see reason in taking an insurance cover, , others feel they are being ‘coerced’ into it by banks — this is against the norms set by Insurance Regulatory and Development Authority .

5. The cooperative credit institutions, covering state cooperative banks, district central cooperative banks and primary agricultural credit societies, are upset at the decision of the National Bank for Agriculture & Rural Development (Nabard) to charge nine per cent rate of interest on the liquidity support to these institutions. This is much higher than what senior Nabard officials had earlier promised to charge, say sources close to cooperative credit institutions.

6. Stock Holding Corporation of India (SHCIL) has entered into a pan India arrangement with IDBI Bank to provide services for issue of stamp certificates and collection of money on its behalf as Authorised Collection Centre. According to a press release issued on Monday, IDBI Bank is the first bank to have an all India tie- up as an Authorised Collection Centre (ACC) for e-Stamping system with SHCIL. SHCIL has established e-Stamping system in Gujarat, Karnataka, National Capital Territory of Delhi and is also in the process of implementing e-Stamping system in Maharashtra where an agreement has already been executed with the State government.

7. Operational risk has always been an important component of risk faced by banks, but a widespread movement to isolate this began only a few years back with a plan by the Basel Committee on Banking Supervision to include specific capital allocation for operational risk in its updated Basel Capital Accord, commonly referred to as Basel II. As per Basel II, operational risk is the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events.

8. Mr Ananthakrishna, Chairman and Chief Executive Officer of Karnataka Bank Ltd, will step into his ninth year in office on July 13. A bank release said here that he has broken the record of late Mr K. Soorynanarayana Adiga who was the bank’s full-time Chairman for eight years.

9. Andhra Bank is offering a special deposit scheme, AB Excel – II. As per the scheme, 9.75 per cent interest would be offered on deposits for 400 days. For senior citizens, an additional interest of 0.50 per cent would be given. The scheme is valid up to July 31.

10.Exchange-traded currency futures will become a reality in the Indian market in the next three-to-four weeks. “Work is in progress and we should be able to launch it by mid-August or latest by end of that month,” a Securities and Exchange Board of India (SEBI) official said. The SEBI Board had in June approved the policy as well as regulatory framework for establishment of exchange-traded currency futures. SEBI would take care of the operational part and the SEBI Chairman, Mr C.B. Bhave, has been authorised to decide on the exchanges that could trade this product, sources added. The stock exchanges have already been invited to apply for trading currency futures.