Tides of 30.04.2009

1.     1.  The banking sector stocks in India are catching investors' fancy fast. At a time when global banks are struggling to stay afloat, Indian banks have started to gain on the bourses.

2.       2. Indian corporates have raised $1.11 billion during March-more than double the mop-up in February-through external commercial borrowings both in automatic and approval route.

3.       3.Bank of India’s net profit grew by 7 per cent to Rs 810 crore, for the quarter ended March 31, 2009, from Rs 757 crore in the corresponding quarter last year.

4.       Canara Bank has slowed down its international branch expansion plans in view of the global financial turmoil. Addressing press persons here on Wednesday, the bank Chairman and Managing Director, Mr A.C. Mahajan, said, “We have approvals to open 10 branches, but we are going slow on our overseas expansion in view of the current situation”. Canara Bank currently has RBI approval to open branches in Johannesburg, Frankfurt, Muscat, Manama, QFC-Qatar, Leicester, New York, Sao Paulo, Dar-es-Salam and Tokyo. Referring to the bank’s results for the financial year 2008-09, Mr Mahajan said that the bank was able to record a robust 29 per cent growth in advances. As a result, it reported a growth in net profit by 32.4 per cent to Rs 2,072 crore in FY09. In the fourth quarter of FY09, the bank was able to grow its net profit by 54.9 per cent to Rs 719 crore.

5.    5. T  he net profit of Dhanalakshmi Bank has grown by 101 per cent to Rs 57.45 crore (Rs 28.46 crore) for the year 2008-09. The operating profit grew to Rs 87.90 crore (Rs 44.50 crore). Having surpassed its annual business targets by comfortable margins during the year, the level of business growth is a record in the bank’s history, a press release issued here said. Extending a special thrust to fee-based business, the bank was able to nurture non-interest income by 88 pe r cent, which was one of the principal drivers of the profit growth. There was significant growth in deposits and advances which have surpassed the banking industry average by far. 

6.       State Bank of Hyderabad’s (SBH) net profit declined 7.5 per cent at Rs 172 crore in the fourth quarter ended March 31, 2009 compared with Rs 186 crore in the corresponding quarter of the previous fiscal.This was due to provisioning of Rs 88 crore for salary hikes and pensions of the employees made during the quarter. The interest income, however, grew by 18.5 per cent at Rs 1,487 crore (Rs 1,255 crore).

7.       Led by an increased demand for bank loan ratings, rating agency Crisil’s standalone net profit for the fourth quarter ended March 31, 2009 rose almost 27 per cent, to Rs 36.43 crore from Rs 28.7 crore in the year-ago quarter.Its total income during the period went up 19.5 per cent to Rs 106 crore, from Rs 88.43 crore.“Revenue growth was driven by increased demand for bank loan ratings with around 500 new bank loan ratings announced during the quarter,” said Ms Roopa Kudva, Managing Director and Chief Executive Officer, Crisil.Total expenditure rose 20.6 per cent to Rs.63.34 crore (Rs.52.52 crore).

8.       8.Mr P. Vaidyanathan has assumed charge as part-time non-executive Chairman of City Union Bank. He will function in that position for two years. A chartered accountant by profession, Mr Vaidyanathan has been a member of the bank’s board between 1984 and 1992 and again from 2003. Mr Vaidyanathan is on the advisory committee and board of many institutions including the Disciplinary Action Committee of NSDL and SEBI-sponsored Investors Education and Protection Fund.

9.       State Bank of India has decided to reduce the interest rate on education loans, which will be sanctioned to students pursuing higher studies from May 2009 to September 2009, by up to 200 basis points.The bank said that interest rates on education loans (linked to the bank’s prime lending rate of 12.25 per cent) up to Rs 4 lakhs, above Rs 4 lakhs up to Rs 7.50 lakhs and above Rs 7.50 lakhs will stand reduced to 11.5 per cent (11.75 per cent now), 11.25 per cent (13.25 per cent) and 11 per cent (12.25 per cent) respectively.Girl students will get a concession of 0.50 per cent over and above the card rate. The lower rates are applicable for new loans sanctioned during the May 2009 to September 2009 period. For existing loans, however, the extant rates would continue.SBI extends loans up to Rs 10 lakhs for studies in India and Rs 20 lakhs for studies abroad.

10.   Central Bank of India’s net profit fell by 51 per cent to Rs 62 crore for the quarter ended March 31, 2009, from Rs 127 crore in the same period last year, due to lower interest income and higher provisioning.The bank had bulk deposits worth Rs 32,000 crore, which resulted in higher interest outgo, said Mr S. Sridhar, Chairman and Managing Director. Of this, the bank has shed deposits worth Rs 11,000 crore.High cost deposits pushed up the bank’s cost of funds to 6.9 per cent (6.27 per cent) and also put pressure on the net interest margin, which came down to 1.43 per cent (2.1 per cent).

Tides of 27.04.2009

1. While cash and banking stocks emerged as major parking slots for equity funds in March 2009, companies in the engineering and capital goods segment were among the biggest losers compared with the deployment of funds in March 2008.A sector-wise break-up of investment data by Plexus Management Services reveals that in actively managed open-ended equity funds (diversified, mid cap, tax plan, infrastructure, dynamic and theme fund) for March 2009, it is seen that the allocation into cash stands at 14.3 per cent from 7.4 per cent in March 2008.
2. ICICI bank, the country’s largest private sector bank that has been fighting bad loans and slowdown in loan growth, declared a dip in net profit that stood at Rs 3,758.13 crore at the end of March 2009, against Rs 4,157.73 crore at the end of 2008.The bank’s fourth-quarter profit too fell 35.3 per cent to Rs 743.76 crore at the end of the quarter ending March 2009, against Rs 1,149.84 crore at the end of the quarter ending March 2008. ICICI Bank’s non-performing advances rose from 1.5 per cent in March 2008 to 1.95 per cent in March 2009.
3. Donning the role of a commander ill-equipped to save the Titanic of the banking world, Citigroup’s India-born chief Vikram Pandit has found a place among the 20 worst-ever CEOs in American history. The top honour has gone to bankrupt Lehman Brothers’ Dick Fuld.The list of America’s 20 worst-ever CEOs, compiled by business magazine Conde Nast Portfolio after consulting with a panel of business school professors, identifies the business “leaders who helped drive their companies into the ground”. It includes “six men who helped make today’s economy stink”, the magazine said.
4. Home loans lender HDFC has no plans to lower its interest rates as of now, its top executive said."We have no plans to lower our interest rates as of now," HDFC's Chairman, Deepak Parekh, told reporters on the sidelines of a function here today.
He said that the Reserve Bank has pegged GDP growth rate for this fiscal at six per cent.
On inflation, Parekh said that the wholesale price index (WPI) was low whereas the consumer price index (CPI) was still high.
5. State Bank of India (SBI) on Wednesday said it would launch 700 branches in this financial year, a hundred less than half of last year.“We will add 700 more branches this year,” SBI Chairman O P Bhatt said.Last financial year, the bank had opened 1,600 branches.Of the 700 branches, many would be opened in rural areas, Bhatt said.
Like last year, this year the bank plans to reach out to 50,000 villages where there are no banking operations, he said.The reach out could be through an ATM machine or a point of sale, he said.The bank would like to raise about Rs 20,000 crore subject to government approval, he said.
6. State Bank of Travancore (SBT) has posted a net profit of Rs. 607.84 crore during 2008-09, the bank’s Managing Director A. K. Jagannathan announced here on Friday. At a press conference, he said the net profit was 57.43 per cent more than that in the previous year. In 2007-08, the net profit was Rs. 386.11 crore. The operating profit in 2008-09 was Rs. 1,056.27 crore, as compared to Rs. 709.09 crore in 2007-08. During the last quarter of 2008-09, which coincided with the unfolding phase of the global economic recession, the bank registered an increase of 29 per cent in net profit over the corresponding quarter of the previous year.The net profit during the quarter stood at Rs. 192.03 crore as against Rs. 149 crore. The higher profit was due to a rise in net interest income, which at Rs. 328.79 crore, was 31 per cent more than Rs. 250.43 crore recorded during the same period of the previous year. The directors have announced a dividend of Rs. 13 per share of Rs. 10 each for the year.
7. State Bank of Bikaner & Jaipur has recorded a business (deposits plus advances) growth of Rs. 9.885 crore during 2008-09 to reach a level of Rs. 69,312 crore. The operating profit recorded a growth of 35 per cent to reach Rs. 892.84 crore while the net profit increased by 28.1 per cent to Rs. 403.45 crore from Rs.315 crore in 2007-08. The directors have declared a dividend of Rs. 12 per share (face value of Rs.10), against 10 per share paid in the previous year.
8. Standard Chartered Bank has started the process to raise around Rs 5,000 crore through an Indian Depository Receipts (IDR) issue in the local markets. The bank has appointed JM Financial and UBS AG as lead managers for what could be the first IDR issue by a global player. Goldman Sachs, Bank of America and Kotak Mahindra are the other banks appointed to manage the issue.
9. Rising delinquencies and non-performing assets (NPAs) in the credit card business are forcing banks to reorient their outlook, from an aggressive sales strategy to inducting people who will focus on recovery and cleaning up the portfolio. As a result, the past year has seen all the four leading players in the credit card business replacing their chiefs. In March last year, T R Ramachandran, business manager (cards) of Citibank was shifted as head of the retail banking division. He was replaced by Sandeep Bhalla, who had experience in the cards business in the US, in May. In October, Ramachandran quit Citibank to become CEO of Aviva Life Insurance. Asked about the change, a Citibank spokesperson said in an emailed statement, “The last year has seen strong managers such as Sandeep Bhalla, Business Manager-Cards, and Harjeet Chopra, Country Risk Manager, join the India Consumer organisation from Citi overseas. Grooming senior managers who have experience across businesses, functions and geographies is critical to Citi's talent strategy and we take this task very seriously.”
10. State Bank of India has agreed to lend Vodafone-Essar, the joint venture between UK’s Vodafone and Essar, Rs 10,000 crore to finance the company’s entry into 3G (third generation) telecom services and expansion of its broadband operations. The five-year loan carries an interest rate of 13.25 per cent for the first two years; thereafter, it will be re-adjusted on the basis of the average prime lending rate of four public sector banks — SBI, Punjab National Bank, Canara Bank and Bank of Baroda, sources said.Banking sources said SBI had decided to down-sell Rs 7,000 crore to other banks and financial institutions and will retain an exposure of Rs 3,000 crore. The interest rate for the first two years is a percentage point above SBI’s benchmark prime lending rate.

Tides of 23.04.2009

1.Private sector lender Yes Bank today said its net profit rose 24.20 per cent to Rs 80.11 crore during the fourth quarter of FY09 despite an eight-fold increase in gross non-performing assets (NPA). Net interest income in the quarter rose 45.4 per cent to Rs 155.2 crore, as against Rs 160.7 crore in the year-ago period. However, its non-interest income declined 16.6 per cent, from Rs 107.6 crore in the quarter ended March 2008 to Rs 89.8 crore in the quarter under review. Gross NPAs rose to Rs 84.93 crore during the quarter, as against Rs 10.57 crore last year. As a proportion of advances, gross NPAs were estimated at 0.68 per cent at the end of 2008-09, as against 0.11 per cent in the corresponding period in the previous year. Higher gross NPAs have resulted in a 40.93 per cent increase in non-tax provisions to Rs 32.19 crore.

2. Shikha Sharma, who is likely to join Axis Bank in August, will have to start the search for at least two top-level executives soon after she takes over as the managing director and chief executive officer.Of the four internal contenders who were in the reckoning for the top job at the country’s third largest private sector lender, MM Agarwal, executive director for corporate and international banking, has already expressed his desire to leave the bank. Though V K Ramani, ED for technology and business processes, is unlikely to quit immediately, he is scheduled to retire by October-end.

3. Infrastructure Development Finance Company (IDFC), a non-banking finance company (NBFC), has revived its plan to enter the banking space.Sources close to the development told Business Standard that IDFC is hunting for a mid-size private sector bank that could lend the company a banking status through a share swap deal.A source close to the development said that IDFC, which has been trying to get a banking licence from the Reserve Bank of India (RBI) for over a year now, has appointed two investment banking firms — IDFC-SSKI and Kotak Mahindra Capital — as advisors for working out modalities on shortlisting a bank for a potential merger.

4. State Bank of Mysore (SBM), the Bangalore-based associate bank of SBI, is aiming at a growth of 30.9 per cent growth in its advances to Rs 33,880 crore and 29.3 per cent growth in deposits at Rs 41,888 crore for FY10 as compared to FY09.

5. There has been a sharp increase in the use of IT in banking services. The Reserve Bank of India devoted almost three pages to it in Annual Policy Statement for 2009-10, released on Tuesday. With the cellular user base expected to touch 600 million by 2010, the volume of pre-paid card recharging alone could exceed the $4-billion mark. Bharti Airtel launched its mobile payment services in June 2008 and has already got one million registered users. “mCommerce will be one of the top three services offered over mobile in the future,” said an Airtel spokesperson. International remittance is another service that operators are piloting in India.

6. HDFC Bank, the second largest private sector bank, has reduced the interest rates on deposits of some tenors by 25-35 basis points, with immediate effect.According to data on the bank’s Web site, the bank has cut the rates on deposits having maturity periods ranging from one year and up to eight years to 7.75 per cent.

7. The Reserve Bank of India has deferred the opening up of the banking sector for foreign players and decided to continue with the current policy and procedures governing the presence of foreign banks in India.In its Annual Policy Statement 2009-10, the RBI said, “In view of the current global financial market turmoil, there are uncertainties surrounding the financial strength of banks around the world. Further, the regulatory and supervisory policies at national and international levels are under review.”

8. Though banks are reluctant to cut rates, some will prune their deposit rates within a month; rates for certificate of deposit (CD) were already down on Tuesday. Lending rates could soften at a later stage. Payment of interest on savings bank account on a daily product basis, wef April 1, 2010 I: Savers will get more out of their savings account and banks’ total payout would be much more. So, if an investor parks Rs 2 lakh and withdraws it 2 days later, she will get interest for two days instead of the lowest balance between 10th and 30th of a month. This is similar to liquid schemes of mutual funds.

9.Kotak Mahindra bank plans to file a petition against the merger of the two companies before the Madras High Court on Thursday — a day ahead of the hearing of a string of petitions on the same issue, including those by Azim Premji’s Zash Investment and ICICI Venture. Meanwhile, the Madras High Court on Wednesday directed Subhiksha Trading Services to submit copies of balance sheets of the past three years and all accounts from April 2008 till date to the provisional liquidator (PL) appointed by the court. It gave the respondent 10 days to submit the same.

10. Banks' settlement with defaulting borrowers will now specifically exclude criminal cases lodged and proceedings with regard to criminality would continue even after the settlement of the civil cases, Indian Banks' Association (IBA) said on Thursday. The IBA decision comes against backdrop of two recent cases where the courts absolved the defaulting borrowers of any criminal wrongdoing who had entered into One Time Settlement (OTS) agreements with banks and where banks withdrew all charges against them.

Tides of 22.04.2009

1. The Reserve Bank of India on Tuesday cut key policy rates – repo and reverse repo – by 25 basis points each in order to push banks to lend more at viable rates and prop up the sagging economy.The underlying message from the banking regulator’s rate action was clear – banks should follow suit by reducing their lending and deposit rates in order ‘to support the return of the economy to a higher growth path’.The RBI, in its Annual Policy for 2009-10, reduced the reverse repo rate – the interest rate RBI pays to banks on the funds deployed with it – to 3.25 per cent (lower than the savings bank rate of 3.50 per cent) and the repo rate – the interest rate that banks pay on funds borrowed from RBI – to 4.75 per cent.
2. You can take a horse to water but can you make it drink? This is the question that the Reserve Bank of India has failed to answer in its Annual Policy Statement for 2009-10. In order to force banks to lend to entities other than itself, the RBI has reduced the reverse repo rate by 25 basis points to 3.25 per cent from 3.75 per cent. This will make it less profitable for banks to lend to the RBI. This, in turn, the RBI hopes, will force them to lend to private sector customers. The credit-deposit ratio has declined sharply from 74 to 71 per cent in four months. Says Prof Suresh Tendulkar, Chairman of the Prime Minister’s Economic Advisory Council, “How will they stay in business if they don’t lend?”
3. In a move that would allow banks to expand their ATM networks more easily, the Reserve Bank of India has done away with the requirement of prior regulatory approval for setting up offsite ATMs. These are standalone ATMs outside branch premises. RBI had earlier dispensed with the requirement of obtaining regulator permission for onsite ATMs (ATMs at branch premises). Currently, banks approach RBI for approval for setting up offsite ATMs. After making a medium-term plan about their requirements of branches and ATMs, banks approach the central bank for permission and proceed with setting them up after receiving the approval.
4. If you have a salary account/savings bank account in a bank, it is better if you withdraw money as per your requirements instead of at one go. From next April, the balance in your savings account will earn interest on a daily basis, following the Reserve Bank of India’s decision to implement new interest calculation methods on such accounts. The payment of interest on SB accounts (3.5 per cent at present) would be calculated on a daily product basis with effect from April 1, 2010. For Rs 1,000, you will get an annual interest of Rs 35 which will be divided into per day interest to be credited to one’s account.
5. All commercial banks were Basel-II compliant as on March 31, 2009, the Reserve Bank of India said. Initially the base approach of the Basel II framework had been adopted, the central bank said. As for the advanced approach to the Basel-II framework, the RBI said it had placed on its Web site a draft circular giving an indicative timeframe for implementation. The enhancement to current Basel-II framework by the international standard setting bodies will be considered for im plementation as appropriate, according to the RBI. These have been mentioned in an annexure, forming part of the annual policy statement, that spells out the Reserve Bank’s status on the recommendations of the G 20 working group on “Enhancing Sound Regulation and strengthening transparency”.
6. The Reserve Bank of India on Tuesday further eased norms for Indian companies to use their internal accruals for buy-back of their foreign currency convertible bonds, as corporate houses continue to queue up to buy back their foreign loans at a deep discount.In its Annual Statement of Monetary Policy, the central bank has proposed to increase the total amount of permissible buyback of FCCBs, out of internal accruals, from $50 million of the redemption value per company to $100 million. The central bank has linked the higher amount of buyback to larger discount.The RBI had begun to liberalise the buyback policy in December 2008. On March 13, 2009, RBI further liberalised the norms by extending the deadline for companies to complete the buyback by nine months from March 31, 2009 to December 31, 2009.
7. The Reserve Bank of India has decided to constitute a Working Group to review the present benchmark prime lending rate (BPLR) system and suggest changes to make credit pricing more transparent. The Working Group would consult all the stakeholders and submit its report by end-August 2009, the RBI said in its Annual Policy Statement 2009-10.Explaining the rationale behind the move, the RBI said that over time, the system of BPLR has lost its relevance as a meaningful reference rate as majority of loans sanctioned by banks are at rates below the BPLR.
8. ICICI Bank on Tuesday announced a 50 basis points cut in its corporate and retail lending rates with immediate effect. The bank also said it is cutting fixed deposit rates across various tenors by 25 to 50 basis points, with effect from April 24. ICICI Bank cut its Floating Reference Rate (FRR) for consumer loans, including home loans to 13.25 per cent from 13.75 per cent. All existing floating rate customers will be benefited by the reduction in the FRR.The bank also cut its Benchmark Advanced Rate, for its corporate customers, to 16.25 per cent from 16.75%.