Tides of 31.07.2015

1.  Higher operating expenses, including staff expenses, and lower non-interest income pulled down Bank of Baroda’s (BoB) net profit by 23%  in the first quarter ended June 30, 2015. Net profit in the reporting quarter was at Rs. 1,052 crs ( Rs. 1,362 crs in the year-ago period). The public sector bank’s net interest income nudged up 4 % to Rs. 3,460 crs ( Rs. 3,328 crs). Non-interest income, comprising fee income, treasury income, and recovery in written off accounts, was down 5.60% at Rs. 967 crs ( Rs. 1,025 crs). Operating expenses rose 19 per cent year-on-year to Rs. 2,225 crore. Within the operating expenses, staff expenses were up 22 per cent to Rs. 1,345 crore. Provisions (other than tax) and contingencies increased 14 per cent YoY to Rs. 600 crore. YoY non-performing assets (NPAs) jumped 43 per cent to Rs. 17,274 crore. Fresh slippages were lower at Rs. 1,684 crore ( Rs. 1,881 crore). The quantum of loans restructured was lower at Rs. 147 crore ( Rs. 986 crore).

2.  HDFC Bank expects deposit rates to come down if the RBI cuts interest rates in the upcoming policy on Tuesday. The RBI is due to announce its third Bi-Monthly Monetary Policy 2015-16 on August 4.“If there is a policy cut, it would imply that banks would be induced to try and cut their deposit rates because that is the indication that the cost of money is going to come down.“It’s only when the banks reduce their deposit rates that they can re-calibrate their base rate,” said Paresh Sukthankar, Deputy Managing Director, HDFC Bank.Seeing a 25-50 basis points cut in the policy rate during this fiscal, he added that meaningful movements in base rates would have to follow changes in deposit rates.

3.  The market seems to be breathing a sigh of relief at public sector banks’ better-than-expected performance in the June quarter, compared to the March quarter. The market gave a thumbs-up to Bank of Baroda’s better-than-expected earnings for the June quarter. While BoB reported a 22 per cent decline in June quarter profit against the corresponding quarter last year, the sharp 75 per cent sequential improvement in profit drove up the stock price.This substantial increase in earnings has primarily been led by the sharp fall in provisioning for bad loans.  Earlier this week, Punjab National Bank also found favour with investors due to a marginal improvement in asset quality compared with the previous quarter.  For BoB, gross non-performing assets as a proportion of loans has gone up to 4.13% in the June quarter from 3.72 % in the March quarter. The slippages have gone up to Rs. 1,685 crs from Rs. 1,359 crs in the March quarter.

4.  Kotak Mahindra Bank’s June quarter results include ING Vysya Bank’s earnings, post-merger. While the June quarter numbers are not comparable to that in the previous year or quarter, Kotak Bank’s earnings have come in far lower than market expectations. The 55.8 per cent fall in standalone net profit is a result of certain post-merger expenses.The first is the pension provisioning of Rs. 339 crore on account of ING Vysya Bank.The second is the increase in provision for loans to Rs. 266 crs ( Rs. 66 crs). Kotak has identified 6 per cent of ING Vysya Bank’s funded and non-funded book or 2.5% the combined book as stress.The third expense relates to the integration cost of Rs. 63 crs.Lastly, around Rs. 30 crs is a result of increase in savings deposit rate for ING Vysya’s account holders to 6 per cent.Overall the bank’s loan book has grown 9%, based on the combined loan book of both entities.One of the reasons for the muted growth is the resultant lower loan limits after combining Kotak and ING Vysya’s loan portfolio.Kotak Bank which has maintained good asset quality, saw its gross non-performing assets (GNPAs) increase to 2.3 % of loans from 1.9% last quarter.

Tides of 28.07 2015

1.  HDFC Bank is set to expand its micro ATM operations further, boosting new customer enrolments online through Aadhaar cards. Starting October 2014, India’s second-largest private sector bank has been using micro-ATMs to authenticate the personal information of prospective customers in remote areas. This is done in less than a minute, requiring just the customer’s Adhaar number and finger impression, thereby doing away with physical documentation to conform to the Know Your Customer (KYC) guidelines. The bank is doing an e-KYC pilot at 16 ultra small (with one or two employees) branches, where it will be placing these machines permanently. , The number of such branches is likely to increase to 300 in the next three-four months. HDFC Bank has nearly 1,600 micro-ATMs on the ground and also aims to double this count to over 3,000 during the period.

2.  A bench of the Jammu and Kashmir High Court ruled in a case that the SARFAESI (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act) cannot be enforced in that State. This Act, passed in 2002, empowered banks and financial institutions to recover the money they had lent to borrowers without going through an elaborate court process. When the Act was passed, bankers projected it as the panacea for all their problems. The impression given was that borrowers would quiver and quake at the very prospect of a banker coming to them armed with a SARFAESI notice. A little over a decade hence, reality has been different. Bankers will concede that they have probably succeeded only one in four times when they used the Act. The High Court judgment on the issue of the applicability of the Act in the State is therefore a setback for banks.

3.  Private sector lender IndusInd Bank has completed the acquisition of Royal Bank of Scotland’s (RBS) diamond and jewellery loan portfolio.“The acquired loan portfolio is approximately Rs. 4,100 crore.” On April 10, 2015, the Hinduja Group-promoted bank had announced that it had entered into an agreement to acquire the diamond and jewellery financing business and related deposits portfolio of RBS in India, subject to regulatory approvals.The deal is projected to enhance IndusInd Bank’s position and market share in the diamond and jewellery financing business. It already has a presence in that segment. RBS has 20 branches across 10 cities in the country.In 2012, it took a strategic decision to exit its customer facing business in Asia Pacific.After the RBI allowed RBS to sell its retail banking business to rival HSBC in 2012, the UK-based bank had said it would wind down its business gradually.

4.  Saraswat Cooperative Bank, India’s largest urban cooperative bank, expects to cross the Rs. 50,000-crore mark in terms of total business conducted by the end of March 2016.In FY2015, the bank’s total business (deposits plus advances) grew 14 per cent ( Rs. 5,559 crore) to Rs. 44,969 crore. Deposits grew 13.5 per cent to Rs. 27,171 crore and advances increased 15 per cent to Rs. 17,798 crore. In the financial year ended March 31, 2015, net profit grew 29 per cent to Rs. 190 crore ( Rs. 147 crore in FY 2013-14). The bank declared a dividend of 15 per cent (10 per cent).As on March 31, 2015, gross NPAs (non-performing assets) as a percentage of total advances edged lower to 4.02 per cent ( Rs. 715 crore in absolute terms), against 4.69 per cent ( Rs. 726 crore).Net NPAs, however, edged up to 0.67 per cent ( Rs. 115 crore) as against nil in the previous year.

Tides of 24.07.2015

1.  At a time when banks are coping with increasing bad loans, asset reconstruction companies (ARCs) need more regulatory leeway to raise foreign and alternative investment funding to buy loans, said Asset Reconstruction Company India (Arcil) chief Vinayak Bahuguna. The capacity of capital constrained ARCs to buy stressed assets from financial institutions has dropped due to declining return on equity. “For the last 13 years, the average return on equity for ARCs has been below 6 per cent. This is proof enough… Asset pricing is one of the important factors. Many auctions (of bad assets on sale) go unattended,” said Bahuguna, the new CEO and MD of Arcil, the oldest ARC in the country.

2.  Muthoottu Mini Financiers, a leading non-banking finance company, has announced the launch of an non-convertible debentures, with face value of Rs. 1,000 each, aggregating to Rs. 125 crs. Roy M Mathew, the company’s Chairman, said Rs. 250 crs is likely to be collected altogether, as an additional Rs. 125 crs can be mopped up under the greenshoe option.The company’s fifth NCD issue is rated BBB- (pronounced Triple B minus) by CARE. The NCDs offer yields up to 12.25%. There are several tenor options, starting from 500 days to 72 months. Interest will be paid on annual or monthly basis. A cumulative payout can also be opted for where the interest is paid at maturity. The minimum investment amount is Rs. 10,000 (10 units). The income from NCDs held in demat format will not be taxed at source.The NCDs will also be made available at all of Muthoottu Mini’s 1,000+ branches. The public issue will close on August 14.

3.  Lakshmi Vilas Bank reported a 43 per cent increase in net profit to Rs. 40 crs for the quarter ended June 30, 2015, as against Rs. 28 crs in the same quarter last year. “There was an improvement across all efficiency parameters,” said the bank’s Managing Director and CEO Rakesh Sharma. The bank plans to raise nearly Rs. 350 crore by way of qualified institutional placement or other sources by September, he told newspersons.Highlighting the bank’s first quarter performance, Sharma said total business increased 21 per cent to Rs. 38,802 crs ( Rs. 32,181 crore). Total deposits stood at Rs. 22,239 crs ( Rs. 18,758 crs). The net non-performing assets (NPAs) as on June 30, 2015, stood at 1.72% as against 3.19% in the same quarter last year, he said.“We have improved our performance across all sectors since June 2014. We hope to continue this momentum going forward this year,” he said. The bank has nearly 2.7 million customers and 400 branches in 16 States and one Union Territory. The RBI has given its approval to the bank to add another 60 branches this year. Of this, 45 will be in the South.

4.  The Board of Catholic Syrian Bank has appointed Anand Krishnamurthy as the MD & CEO, pursuant to RBI approval. Prior to this, Krishnamurthy worked with HSBC for 22 years.  S Santhanakrishnan is currently the part-time Chairman of the bank. Catholic Syrian Bank is an over 94-year-old bank with a strong base in Kerala along with significant presence in Tamil Nadu, Karnataka and Maharashtra.

Tides of 21.07.2015

1.  Melbourne-based banking major ANZ plans to open two more branches in India. The third-largest bank in Australia and New Zealand is all set to open its doors to customers in Gurgaon and Bengaluru. Talking to newspersons at its technology back-office, CEO Michael Smith said that India is a major engine of growth for the bank, especially at a time when China is showing signs of a slowdown. However, he added that the company’s banking customers in China is minimal. ANZ had established its India operations in 2011, which supports institutional and corporate clients for banking services. Smith noted that with Prime Minister Narendra Modi at the helm, trade and investment flows with Australia and New Zealand are on the rise; and this has prompted the company to expand its presence in India. ANZ is not new to the Indian banking scene. It re-entered the Indian market and sought approval from the RBI back in 2010. ANZ used to own Grindlays Bank, which had a significant presence in India, but sold it in 2000.In May 2014, ANZ received a licence from the RBI to open branches in India. Additionally, it has a large back-office in India, which includes catering to technology as well as banking services for the parent.

2.  IDBI Federal Life Insurance will this year focus on enhancing its brand image through association with sports. It is looking at different sports at the national level to improve its  brand image. Co’s efforts would be to do something unconventional. Recently, the life insurer tied up with Mumbai Cricket Association to launch a bowling foundation. The aim of MCA-IDBI Federal Life Insurance Bowling Foundation is to hone meritorious talent and develop them into first rate bowlers.

3.  Bengaluru-based start-up Innoviti Payment Solutions (IPS) has received a second round of funding of Rs. 30 crore, co-led by NR Narayana Murthy’s Catamaran Ventures. Along with Murthy’s fund, New India Investment Corporation, Canada, a wholly-owned subsidiary of Gravitas Financial, was involved in this round of funding, according to company officials. The funding will be used to expand Innoviti’s business of real-time distribution of credit to small and medium enterprises. In the previous round of funding, which included a mix of debt and equity, Innoviti, which started its payments business in 2008, had raised Rs. 10 crore. The company currently processes Rs. 8,000 crore of payment transactions and originates over Rs. 1,000 crore of loans.

Tides of 20.07.2015

1.  Greeks queued outside banks on Monday as they reopened three weeks after closing to stop the system collapsing under a flood of withdrawals, the first cautious sign of a return to normal after a deal to start talks on a new package of bailout reforms. However capital controls will remain and payments and wire transfers abroad will still not be possible - a situation which German Chancellor Angela Merkel said on Sunday was "not a normal life" and warranted swift negotiations on a new bailout. The stock market will also remain closed until further notice.

2.  In a top management reshuffle, foreign lender Standard Chartered Bank announced that Sunil Kaushal (current Regional CEO South Asia and India CEO) will lead Africa & Middle East region while Ajay Kanwal will head ASEAN & South Asia region, including India. The global bank has called this "a simplification of its organisational structure that will improve accountability, speed up decision making, reduce bureaucracy and play a key part in delivering the previously announced $1.8 billion of cost savings by the end of 2017. The Group has also announced a new management team to lead and run the Group, led by Bill Winters, Group Chief Executive. Both Kaushal and Kanwal, members of the Group’s Management Team, will assume their new role from October 1, 2015 and will report to Group CEO Bill Winters.

3.  Mangalore-based Corporation Bank  is looking to change the way it does business after a difficult time. Under a revamped strategy the bank has shed its high-cost deposits and reduced overhead expenses. It is also trying to make money from the government's financial inclusion schemes.

4.  A study conducted by FIS Global, a banking and payments technology consultant, has shown that 84 per cent of bank consumers in India feel that their banks do not meet expectations. The FIS Consumer Banking PACE Index, conducted with 9,000 banked consumers in nine countries including 1,000 households in India , indicates the gap between a customer's key expectations and their bank's current delivery performance against those parameters. The survey respondents ranked 18 attributes according to their importance and perceptions of how well banks perform.