Tides of 31.10.2015

1.     India’s largest private lender ICICI Bank’s net profit grew by 12% to Rs. 3,030 crs for the July-September quarter, compared with Rs. 2,709 crs in the corresponding quarter last year. “Growth was lower due to subdued corporate activity…We expect NPA (non-performing asset) additions to be lower than the total additions last year and we are on track,” said Chanda Kochhar, MD and CEO of the bank. Net interest income (difference between interest earned and expended) increased to Rs. 5,251 crs, up 13% from last year. Other income grew 10% to Rs. 3,007 crs, driven by fee and treasury income. ICICI Bank’s asset quality deteriorated as gross NPAs increased to 3.77% of total loans as against 3.12% a year ago and 3.68% in the previous quarter. Year-on-year, net NPAs also worsened to 1.65% from 1.09 % in the September last year.

2.    Private sector lender Kotak Mahindra Bank’s standalone profit grew 28% year-on-year to Rs. 569.5 crs for the July-September quarter. The earnings included ING Vysya Bank’s figures. Net interest income (difference between interest earned and expended) jumped to Rs. 2,278 crs, up 44% compared with Rs. 1,584 crs a year ago. Other income grew 35% to Rs. 970 crs from Rs. 720 crs. Asset quality deteriorated as gross non-performing assets (NPAs) increased to 2.08% of total loans from 1.59% a year ago and 2.04% in the previous quarter. Net NPAs also worsened a tad to 0.93% from 0.84 % in September last year. Sequentially, net NPAs remained flat. As of September-end 2015, total advances jumped 65% to Rs. 1.35 lakh crs on account of ING Vysya Bank’s loan book. Similarly, total deposits almost doubled to Rs. 1.20 lakh crs. Consolidated profit rose 31% to Rs. 942 crs during the quarter compared with Rs.718 crs in the year-ago period. Consolidated numbers include banking and other businesses, such as broking, insurance and investment banking, among others.

3.    With some of its peers embarking on a journey to transform themselves into small finance banks over the next 18 months, Hyderabad-headquartered SKS Microfinance has decided to do more of what it is already doing. India’s only listed microfinance company will go about strengthening its market share in the rural markets, expand loan portfolio, reduce cost of borrowing, reduce operating costs, and bring down lending rates to below 20 per cent, President S Dilli Raj told BusinessLine in an interview. Though the MFI did not bag the coveted small finance bank licence, that has not dampened Raj’s spirit to grow his company’s business and prepare it for a bank licence, as and when the RBI puts the licensing process on tap.

4.    Lower provisioning helped Karnataka Bank register a 15.6% growth in net profit during the second quarter of 2015-16.The bank’s net profit stood at Rs. 102.25 crs during the quarter against Rs. 88.46 crs in the corresponding quarter of the previous fiscal. Gross NPAs fell to 3.18% (3.53%), and net NPA to 1.96% (2.37 %). The quantum of gross NPAs came down from Rs. 1,060 crs in Q2 2014-15 to Rs. 1,043 crs in Q2 2015-16. The net addition to the NPA was Rs. 10 crs sequentially. In the June quarter, the gross NPA was Rs. 1,033 crs.

Tides of  17.10.2015

1.  Bank of Baroda has conferred poet, lyricist and advertising guru Prasoon Joshi with Maharaja Sayajirao Bhasha Samman. The bank said in a statement that the award, in memory of Bank of Baroda’s founder Maharaja Sayajirao Gaekwad-III, was given to Joshi for his outstanding contribution in promoting Hindi.

2.  South Indian Bank today reported 22.38 % increase in net profit at Rs. 93.38 crs in the second quarter ended September 30, helped by lower provisions for bad loans. The bank had clocked a net profit of Rs. 76.30 crs during the same quarter in the previous fiscal. Total income of the private lender increased to Rs. 1,526.19 crs during the quarter under review, up 8.55% from Rs. 1,405.95 crs a year ago, the bank said in a BSE filing. The bank’s provisioning and contingencies were at Rs. 67.47 crs in the second quarter of 2015-16 against Rs. 95.71 crs in the year-ago period.

3.  China Reinsurance (Group) raised $2 billion after pricing its Hong Kong initial public offering at the top of expectations, sources with direct knowledge of the plans told Reuters.The company priced the 5.77 billion new shares, equivalent to 13.7% of its enlarged share capital, at HK$2.70 each, after marketing the deal in an indicative range of HK$2.25 to HK$2.70, added the sources, who declined to be named because details of the IPO aren’t yet public.China Re’s IPO would be the largest in Hong Kong since property developer Dalian Wanda Commercial Properties Co Ltd raised $4 billion in December. It should be surpassed next week when distressed debt manager China Huarong Asset Management Co Ltd prices its listing, worth up to $2.8 billion.

4.  The Central Bureau of Investigation is investigating top officials of a Chennai-based company and two firms of chartered accountants on allegations of cheating IDBI Bank to the tune of ₹274 crore. According to a CBI press release, available on its website, a case has been registered on complaint by IDBI Bank that between 2005 and 2013 these individuals have cheated it using forged documents and falsified accounts. Searches are being conducted at eight places, including seven in Chennai and one in Hyderabad, in the offices and residences of the accused which led to recovery of incriminating documents. Further investigation is in progress.

5.  Axis Bank has internally started looking into the forex scam unearthed by the Enforcement Directorate (ED) involving a total of eight banks involving Bank of Baroda, Axis Bank, ICICI Bank, Kotak Mahindra Bank, Yes Bank, IndusInd Bank, DCB Bank and Dhanalaxmi Bank. In a statement, Axis bank said, “We have taken note of the recent media reports involving our Bank along with 8 other banks relating to a probe by the Enforcement Directorate (ED).”

6.  India Post will soon be a force to reckon with. Until now India Post was seen as a slumbering giant. Not anymore. It has woken up. This time it will not give it up, as payments bank presents a historic opportunity for India Post. “It’s very exciting for us as the payments industry is going to be like skating on thin ice. We don’t know who will fall by the wayside, when there will be a bloodbath, and what kind of pricing/revenue models will emerge,” Mr.Ramanujam  said, adding that this will be a game of high volumes and wafer-thin margins. India Post is among the 11 successful applicants that recently got in-principle nod for a payments bank licence from the RBI. The new entity will be registered as a company and will be called ‘India Post Payments Bank’. It will have an initial capital of Rs.300 crs, much more than the minimum of Rs.100 crs stipulated by the RBI. “We will soon approach the Cabinet for approval,” Ramanujan told Business Line here.

Tides of 8.10.2015

1.    State-run Indian Overseas Bank said on Monday the Reserve Bank of India (RBI) had ordered a so-called "prompt corrective action", adding the action would not have any material impact on its performance. The lender did not give details of the action but said the directions given by the RBI were for improving the internal control of the bank and for the purpose of consolidation of its activities. Under RBI rules a prompt corrective action is triggered if a lender sees its capital base eroding, a sharp jump in bad loan ratios or its return on assets dropping below 0.25 percent.

2.    Export organisations have asked the government for higher export incentives, cheaper credit, faster reimbursements of input taxes and lower transaction costs to help deal with the crisis of continuously falling exports. In a review meeting chaired by Commerce Secretary Rita Teaotia and attended by 27 export organisations on Wednesday, exporters made a strong case for the government coming to their aid. “The major issues highlighted by the export councils related to early refund of the duty drawback amounts, credit of interest subvention, increase in the incentives under the existing schemes and agreements with specific countries to promote exports of certain items,” a Commerce Ministry release said.

3.    With rainfall below average across most parts of the country, the impact on the agriculture sector is making bankers nervous. The total exposure of banks to the sector has shot up to Rs. 8,07,800 crore from Rs. 7,20,400 crore in August last year.With the India Meteorological Department pegging the monsoon deficit at 14 per cent below the long-period average, bankers are being forced to restructure some of these loans in a bid to keep non-performing assets (NPA) in check.“There could be problems where the rain deficiency is over 20 per cent. It is also a State subject as to which region is declared drought zone and, accordingly, banks will have to provide for the restructuring,” said GK Kansal, Chief General Manager, State Bank of India.Restructuring leads to renewal of loans by extending the tenure for the borrower, usually with a lower instalment amount. While this avoids immediate default of loans, lower returns hurt the lender.

Tides of 6.10.2015

1.      With big banks, such as State Bank of India and ICICI Bank cutting their base rates (or the minimum lending rates) over the last one week, more banks joined the bandwagon on Monday. Union Bank of India on Monday reduced its base rate by 0.35 percentage points to 9.65 per cent from 10%. A senior Union Bank official said following the base rate cut, new customers will get home loans at 9.65 per cent. Existing customers too will benefit as their floating rate home loans will get re-priced at the base rate. The equated monthly instalment on a 30-year floating rate home loan will come down to Rs. 852 per lakh from Rs. 878 per lakh. So, a customer, who has taken a Rs. 50-lakh home loan, will save about Rs. 1,300 in EMI every month. Standard Chartered too announced a reduction of 0.25 percentage points in its base rate from the current level of 9.75 per cent to 9.50 per cent. The base rate change in the case of these two banks is effective from October 5, 2015. Canara Bank’s board has approved reduction in its base rate by 0.25 percentage points to 9.65 per cent from 9.90 per cent for loans/ advances effective from October 7.State Bank of Mysore has revised downward its base rate to 9.65 per cent from 9.90 per cent, effective from October 7.Corporation Bank has announced a reduction of 20 basis points in its base rate. The bank informed the NSE on Monday that it has reduced the base rate for lending to 9.70 per cent from 9.90 per cent. The reduction comes into effect beginning October 8.Following the Reserve Bank of India cutting its policy repo rate on September 29, State Bank of India became the first bank to get off the block, announcing 0.40 percentage points cut its base rate to 9.30 per cent.Andhra Bank and Bank of India followed suit on the same day, cutting lending rates by 0.25 percentage points each to 9.75 per cent and 9.70 per cent, respectively.Repo rate is the interest rate at which Reserve Bank provides short-term funds to banks to help overcome liquidity mismatches.

2.      Union Bank of India will buy KBC Asset Management’s 49 per cent stake in Union KBC Asset Management.The joint venture was established in 2009. In the July-September 2015 quarter, Union KBC Asset Management had average assets under management (AAUM) aggregating to Rs. 2,672 crore.According to the Association of Mutual Funds in India data, the AAUM of 44 mutual funds during the reporting period was at Rs. 13,15,760 crore.The public sector bank, however, did not disclose the deal size. According to mutual fund industry thumb-rule, an acquirer usually pays 2 to 2.5 per cent the AUM to buy equity schemes and 0.75 to 1 per cent for debt schemes. So, the pay out by Union Bank to KBC Asset Management will be in proportion to the latter’s holding. Union Bank, in a statement, said the transaction, which is subject to regulatory approvals, will have no impact on the joint venture’s client positions and product portfolio.Arun Tiwari, Chairman and Managing Director of Union Bank of India, said the transaction reaffirms Union Bank’s vision to provide all financial solutions under one umbrella which apart from banking products and services includes life insurance products through its joint venture Star Union Dai-ichi Life Insurance Co and mutual fund products through Union KBC AMC to its customers. Tiwari said his bank is committed to offering a portfolio of services to investors under its own brand.Shares of Union Bank of India closed at Rs. 182.35 apiece, up 4.83 per cent over the previous close on the BSE.

3.      Rating agency Crisil downgraded debt worth Rs. 2.4 lakh crore in the first six months of the current financial year. Of this, 90 per cent is owed by firms from either investment-linked or commodity sectors.The rating agency said that the credit quality pressures intensified for the highly leveraged firms, companies with a debt to EBITDA ratio of more than 2.5 times, in the first half of the current fiscal ended September 2015, according to Crisil’s definition.“They will remain under pressure till deleveraging happens through asset sales...The firms in the metals, real estate and infrastructure space continue to face pressure because of high debt or a steep fall in product prices,” Crisil said in the report.