Tides of 26.01.2009

1. Citigroup has sold government guaranteed bonds worth 12 billion dollars, which will help the beleaguered entity to boost its balance sheet. The Financial Times has reported that Vikram Pandit-led Citi has sold "$12 billion of government-guaranteed bonds, the largest issuance since the US authorities agreed to backstop financial companies' short-term debt in November".
Further, the daily noted that the issue surpasses a $10 billion offering by General Electric as the largest bond issue to be guaranteed by the Federal Deposit Insurance Corporation as part of the government's efforts to help the financial sector.Citi has posted losses for five consecutive quarters, with $8.29 billion of losses in the fourth quarter of last year alone.

2. A further cut in policy interest rates is expected when the Reserve Bank of India (RBI) conducts its third quarterly review of the monetary policy on Tuesday. A 50 basis point (100 basis points is 1 percentage point) cut in the rate at which the central bank provides overnight liquidity to banks (repo rate) as well as the rate at which it absorbs liquidity from banks is widely expected.RBI has the ability to lower policy rates since economic growth is slowing down, commodity prices are falling, and more cuts in fuel prices are on their way. “We expect the inflation rate to fall to around 2.9 per cent in March,” said Shailesh K Jha, senior regional economist, Barclays Capital.Namrata Padhye, economist, IDBI Gilts, seeks a wait and watch approach. “A gradual approach towards easing would ensure that no panic is created in markets over the outlook on domestic economy.”Since September 15, 2008, the RBI has eased policy rates by 350 basis points, but banks have reduced rates, grudgingly, by just 150-200 basis points.

3. The country's largest lender State Bank of India's net profit for the October-December quarter jumped by 52 per cent to Rs 3,713.66 crore. The bank had a consolidated net profit of Rs 2,442.32 crore in the December quarter last year, SBI said in a filing to the Bombay Stock Exchange.Total income rose to Rs 30,313.14 crore in the third quarter, from Rs 24,380.99 crore a year ago, a jump of 24 per cent.On a standalone basis, the bank recorded a net profit of Rs 2,478.42 crore during the quarter under review, whereas it had a net profit of Rs 1,808.64 crore in the same quarter a year ago.During the quarter, standalone total income stood at Rs 21,256 crore, while it was Rs 15,364 crore last fiscal.The interest income of the bank went up by 42 per cent at Rs 18,030 crore as against Rs 12,667 crore in the same quarter a year ago.

4. India's second largest lender and largest private lender, ICICI Bank, has posted a Rs 1,272.18 crore net profit for the quarter ended December 31, 2008, as compared to Rs 1,230 crore in the year ago period, showing a rise of 3.41 per cent. The total income of the bank during the quarter grew to Rs 10,351 crore against Rs 10,338 crore in the same period of 2007-08.

5. The central government and the Reserve Bank of India (RBI) will jointly work to chart out more stimulus packages for industry, Home Minister P Chidambaram said in Chennai Saturday.
"The country is facing only a slowdown and not a recession. Counter and corrective measures have to be taken to increase domestic demand," Chidambaram said.Launching the BYST Growth Fund promoted by Bharatiya Yuva Shakthi Trust (BYST), a charitable organisation that helps underprivileged youth set up businesses, the International Finance Corp (IFC), and private equity fund VenturEastthe, the former finance minister added that the government is taking fiscal measures while RBI is taking monetary measures for that purpose.

6. The Prime Minister's economic panel today said banks are currently not cutting lending rates much as their deposits rates are high, but hoped that they would slash rates gradually."They (banks) find themselves in a fix. Deposit rates have been raised and the lending rates cannot be reduced significantly immediately. So, I think that is the bind in which they are," Prime Minister's Economic Advisory Council Chairman Suresh Tendulkar told reporters in New Delhi.
He, however, said banks would gradually cut down interest rates.Tendulkar, however, refused to hazard any guess or make any prescription for RBI on interest rates in its forthcoming quarterly review of monetary policy slated for January 27."It is for RBI to take a call. I will not make any suggestion on that part," he said.

7. HDFC Bank and ICICI Bank that maintain salary accounts of Satyam employees said they were not holding any ‘fake’ accounts while Citibank declined to comment.The public prosecutor in the Satyam scam case alleged on Thursday that Satyam had as many as 13,000 fake salary accounts. Banks, however, maintained that there have been no irregularities in the know your customer (KYC) procedure and they do not have any fake accounts with them.“We have no salary account with any other bank,” a Satyam spokesperson said when asked whether there were more banks handling employees’ salaries.“There has been no irregularity at our end and we have done our due diligence,” said an official with one of the three banks who did not wish to be identified.

8. Andhra Bank expects an overall business growth of 23 per cent in the eastern region by the end of this fiscal. The bank has set a target of achieving a total business of Rs 3,140 crore in the region by March 2009, as against Rs 2,370 crore till December 31, 2008. The total business of the bank was Rs 95,770 crore till December 2008, and it expects to cross Rs 1,00,000 crore mark by the end of this fiscal, and Rs 1,50,000 crore by September 2010, said Ramakrishnan K S, zonal manager, Andhra Bank at a press conference in Kolkata on Saturday. The bank has taken several initiatives like to boost current account and saving accounts (CASA) deposits, which is nearly Rs 500 crore in the region. The bank has 23 branches in West Bengal, and has applied for licences with the Reserve Bank of India (RBI) to open additional four branches in the state.The bank also expects to have all its 1,410 branches under core banking solutions (CBS) by the end of this fiscal.

9. Chennai-based IndBank Merchant Banking Services, a subsidiary of Public-sector lender Indian Bank, is planning to open 30 branches and 200 terminals over the next 15-24 months. The bank is also planning to invest Rs 18 crore through equity once the market condition improves.Meanwhile IndBank has reported a net loss of Rs 0.97 crore during the third quarter ended December 31,2008 as compared to a profit of Rs 10 crore during the same period of the previous financial year.

10. The Centre along with the Reserve Bank of India (RBI) has extended credit to the tune of Rs 7,200 crore to Small Industries and Development Bank of India (Sidbi) for the development of the medium, small and micro enterprises (MSME) sector, which contributes 8 per cent to the country’s GDP and 40 per cent to the total exports.

Tides of 13.01.2009

1. With the easing of yields and the likelihood of a further fall, there has been a flurry of Tier-II and perpetual debt issuances by banks to raise capital. Most banks will be required to enhance or add up capital as they are likely to expand 25-30 per cent this fiscal. Also, with the deadline of March 31, 2009 for implementation of Basel II norms approaching, banks are looking to maintain a cushion in their levels of capital adequacy, said analysts. As inflation and interest rates were higher in the first two quarters, there were not many bond issuances. Therefore, the December-January period is seeing hectic activity in the bond market as banks rush to raise capital to avoid bunching up of issues towards the end of the fiscal. Some banks that are likely to come out with bond issues in the near future include Bank of India, Canara Bank, State Bank of India, IDBI Bank, Union Bank of India, Corporation Bank, Allahabad Bank and Bank of Baroda.

2. South Indian Bank’s net profit for the quarter ended December 2008 increased by 33 per cent to Rs 54.20 crore against Rs 40.72 crore for the corresponding quarter of the previous fiscal.The bank is targeting a net profit of Rs 190 crore this fiscal. It has achieved Rs 144.50 crore in the first three quarters. Though credit growth has been less compared with the earlier years, it has grown by 13 per cent year-on-year, its Managing Director and CEO, Dr V.A. Joseph, said. Out of the aggregate business of Rs 27,779 crore as at December 2008, advances accounted for Rs 11,340 crore (against Rs 10,020 crore as at end December 2007).

3. Having achieved a national footprint and scale of operations, ING aims to double its market share in the country’s financial services sector. Towards this, the company has been carrying out a series of marketing activities, including a television commercial.Currently, the market share of each of ING’s three businesses in India (banking, asset management and insurance) is between 1 and 2 per cent. ING’s business footprint is across tier 1, 2 and 3 cities. While the life insurance business is present in 232 cities, the bank is present in 300 cities.

4. In a further setback to the Indian IT sector, the World Bank made public it has barred Wipro Technologies and Megasoft Ltd since 2007 from receiving direct contracts under its corporate procurement program. The Bank said Wipro’s offer of American depository shares (ADS) to its staff as part of public offering in 2000 was against its policy and it banned the vendor till 2011.
The Bank made public the names of debarred companies on January 11 under the new disclosure policy, stating the “change (in policy) was in the interest of fairness and transparency.” Analysts said the Bank’s move could have been prompted by the Satyam episode.It banned Megasoft Ltd for four years from December 2007 for participating in a joint venture with Bank staff while working with the Bank. Earlier, it put a ban on Satyam currently in the news for Rs 7,000 crore accounting fraud.

5. If you have a health insurance policy with a cover below Rs 1 lakh, you may soon be able to enjoy portability of your policy from one insurance provider to another. The General Insurance Council (GIC), in a crucial meeting held recently, favoured the portability for policies below Rs 1 lakh and formal guidelines to this effect would be sent to the Insurance Regulatory and Development Authority (IRDA) soon, Mr M. Ramadoss, Chairman, Oriental Insurance Company and member of GIC, told Business Line. Under present norms, a policy holder is given health cover for a year which has to be renewed every year. If there is no claim, the policy-holder is entitled to a bonus in the form of an increased sum. In addition, the bonus gets accumulated for every claim-free year.

6. With the rate of inflation declining steadily in recent weeks to touch a 10-month low of 5.91 per cent (week ended December 27), there is possibly a smug feeling in New Delhi that the price situation is fully under control. The fact is it is not. International prices of an array of commodities have no doubt declined in the last four months. While global growth concerns have weakened the demand side, drying up of liquidity, rising inventories and exit of speculative capital have contributed to the poor price sentiment. Producers have promptly responded with output cuts — OPEC has cut crude output by as much as 4 million barrels a day. There is reason to believe that supply is declining faster than demand as a high rate of compliance on part of OPEC and continued disappointing non-OPEC production are more than offsetting demand weakness.

7. German Chancellor Angela Merkel's government is to hammer out a major new stimulus package this week for Europe's biggest economy but her fractious coalition is still divided on the details.

8. The government is looking at a plan to inject public funds into 40 or more regional banks, whose capital bases are being hurt by rising bad loans amid the financial crisis, the Mainichi newspaper reported on Wednesday.

9. ICICI Bank that pioneered 12-hour banking (8 am to 8 pm) in the country, is gradually cutting down its business hours in branches. After cutting down business hours at many of its branches by 3 hours from December, the bank has now decided to cut down business hours at all its branches on Saturdays. The second largest bank has decided to cut business hours at its branches on Saturdays to 5 hours, from 9 am to 2 pm.Decision to cut business hours on Saturdays will be effective from February 7, the bank said on its website.

10. Bankers to Maytas Infrastructure and Maytas Properties are reviewing their exposure to both the companies in view of the rise in risk. The fear is that project delays could result in guarantees being revoked.With growing controversies around the Ramalinga Raju family-promoted entities, banks will play safe”, said a top official of a public sector bank.State Bank of India, which has an exposure of less than Rs 500 crore, is reviewing all these accounts and sharing information with both the central government and the Reserve Bank of India to see if there is a need to take proactive action, SBI Chairman O P Bhatt said on the sidelines of 'Vibrant Gujarat’ in Ahmedabad On Monday.Bhatt, however,said there is no problem with the Maytas accounts and the entire exposure is collateralized. “No personal loans have been given to Raju and his sons,”.he said.Confirming the review of exposures, ICICI Bank said in a statement, “We are a banker to the company and are reviewing our exposure.” It, however, did not elaborate on the kind and the extent of its exposure.“We cannot comment on individual lending exposures. We will issue any disclosures if and when we assess that there is an impact that requires such disclosure”, India’s second largest lender said.