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(The Hindu Busienss Line 2nd May 2008)The fourth quarter of the last fiscal was a relatively lacklustre one for public sector banks. For the 14 banks that have released their numbers, there has been an 11 per cent growth in profits. The picture might have been much worse but for the much higher profits posted by a few banks such as Bank of India and Corporation Bank. Lack of pricing power or the inability to pass on higher costs was visible. Interest expenses for the group were higher than their interest income. The net interest income of these 14 banks (interest income less interest expenditure), dropped 3 per cent compared to the corresponding quarter in the previous year. Only Bank of India seemed to show robust growth in this parameter. This year has seen a see-saw of sorts in profit performance of public sector banks across four quarters. In the first quarter, public sector banks posted a 40 per cent growth followed by a deceleration to about 20 per cent in the second quarter. Tha...

Public sector banks fare better on bourses (Live mint.com 20th Feb 2008)Public sector banks that account for close to 70% of the Indian banking industry seem to be insulated from the recent market turmoil. The 30-share Sensex of the Bombay Stock Exchange (BSE) lost 5.08% in the last one month, between 18 January and 18 February, but the public sector banks were relatively less affected, losing only 2.19% during the same period. In comparison, the stocks of Indian private sector banks lost more than 7%. In fact, public sector banks have consistently outperformed their private sector counterparts over the past year, gaining more than 75% between February 2007 up to now. During this time, private sector banks have gained 48.36%, while the Sensex rose 25.31% and the BSE Bankex, an index of 18 listed banks, rose more than 50% in this period. Among the public sector banks, State Bank of India (SBI) and Bank of India (BoI) have gained more than 100% in the past one year. Three other large ban...

Bank stocks will keep doing well (Live mint.com 30th Jan 2008)What comes through from the Reserve Bank of India’s third quarter review of monetary policy statement is that on one hand governor Y.V. Reddy is still very worried about inflationary pressures in the economy, on account of rising money supply and high food and fuel prices. On the other, he’s not particularly bothered about the slowdown in growth. The crux of the policy statement is this: “While the dangers of global recession are relatively subdued at the current juncture and consensus expectations seem to support a soft landing, the upside pressures on inflation have become more potent and real than before. Food and energy prices are set to impart a permanent upward shock to inflation globally and, in particular, in emerging market economies.” That’s the reason the apex bank has chosen perhaps to err on the side of caution, preferring to wait and watch. What does that mean for the markets? The immediate reaction was a sell-...

‘Losses from small ticket loans, cards to rise’ (The Hindu Business Line 9th Jan 2008)Loss levels in small ticket personal loans and a portion of credit card receivables, which are currently at 7-9 per cent, could rise to 10-13 per cent in three years, said a report by Crisil Ratings.Terming this segment as ‘sub-prime’ assets in the Indian context, the report said that these are unsecured loans between Rs 5,000 and Rs 25,000-30,000. Of the total credit card receivables, about 15-20 per cent falls in the profile of low income groups. The total retail assets of the Indian banking industry are about Rs 4 lakh crore. Of this the ‘sub-prime’ segment forms about 5 per cent or Rs 20,000 crore, said Mr Tarun Bhatia, Head, Corporate and Government Ratings. More Banks throng global markets for funds (Business Stndard 9th Jan 2008) Lenders prefer syndicated loans over bonds to avoid provisioning. Indian banks are flocking to the international market for raising funds, despite the sub-prime cris...

Public sector banks may decide on interest rate cut soon (The hindu Business Line 7th jan 2008)Following the Finance Minister, Mr P. Chidambaram’s appeal to banks to reduce deposit and lending rates by 0.5 percentage points, the asset liability management committees of most public sector banks are likely to meet soon to take a decision on this.. At the quarterly performance review meeting with chief executives of public sector banks on Friday, the Finance Minister asked them to reduce interest rates in order to encourage investment and consumption to boost economic growth. But most bankers feel that there is no great scope for reducing rates immediately, given the likelihood of a hike in domestic fuel prices and with inflation still tending towards the higher side. More Ministry, RBI differ on NPA classification (The hindu Business Line 7th jan 2008)The Finance Ministry has taken the view that advances to infrastructure projects that face completion delay exceeding a year need not be ...

Banks preparing to hike discounts to their PLRs (The Hindu Business Line 3rd Jan 2008)In a bid to stimulate credit offtake in the peak seasons, banks are preparing to offer discounts to their respective benchmark prime lending rates (BPLR). Currently, only highly rated corporates are raising bank funds at discounts to the BPLR, that currently ranges 12.75 per cent to 13.5 per cent. The discounts, even for these corporates, are barely about 100 basis points. Yet despite the discounts, the average cost of borrowings was close to 11 per cent. Bankers said that one of the major factors that prevented corporate credit offtake was the high rates. The only other sector drawing credit at low rates was the farm sector. Farm loans are dispensed at 7 per cent, as banks are entitled to a Government subsidy of another 2 per cent, taking the effective yield on the advances to 9 per cent. Bankers said that the discounts were likely to be raised by another 50 to 100 basis points in the coming weeks, i...

Liquidity strain likely to soften (Business Standard 31st Dec 2007) Liquidity is expected to ease gradually this week since the government is expected to pay the interest on its special deposit schemes. Moreover, there are no major outflows expected from the system as there are neither any liquidity-tightening measures nor any government-borrowing programme. Moreover, outflows towards advance taxes and the government auction in December are expected to come back to the system. RBI is also likely to mop up dollar funds that may flow into the system through private equity investments or the corporate sale of dollars. More Banks pushing for benchmark rate for term loans, deposits (The Hindu Business Line 31st Dec 2007)Once again, banks in India are trying to work out a transparent benchmark interest rate for term loans and deposits. Indian Banks Association (IBA) has renewed its initiative to work out an indicative inter-bank term money rate or Mumbai inter-bank offered rate (Mibor). ...

Banks get trapped in bulk deposits war (Business Standard 27th Dec 2007) A top official at the Indian Banks’ Association (IBA) was having a discussion with the then two managing directors of State Bank of India (SBI) at the skyscraper headquarters of the country’s largest bank. IBA’s agenda was to get SBI to agree to douse the bidding war for corporate deposits, with successive cash reserve ratio (CRR) hikes and continued high credit growth having made banks run helter-skelter for resources. More Bonds gain from RBI’s focus on stability (The Hindu Business Line 27th Dec 2007)Bond markets were stable during the year virtually fire-walled from the turmoil in the foreign exchange markets through both active and passive interventions by the country’s banking regulator, the Reserve Bank of India. The passive interventions were more by way of sending signals through moral suasion, a euphemism for speeches and by the RBI’s Governor/Deputy Governors and periodic press releases. Bankers take ...

Banking stocks worth investing in (rediff.com 24th Dec 2007) Public sector banks will take a few more years to match the valuations of private banks, but only if they resolve the key issues that are restricting their growth. In a volatile market, it is a dilemma to choose between value (slow growth, low valuation) and growth stocks (high growth, high valuation). A classic example to prove this fact is the Indian banking sector, which is dominated by large number of public sector banks (PSBs) which come under the value category whereas the private banks are classified as growth stocks.

PSU banks see potential in bad loans, plan asset reconstruction cos (The Hindu Business Line 24th Dec 2007)Some of the public sector banks that have largely been sellers of bad loans are now considering buying such assets, sensing the business potential this market can offer. A senior official from State Bank of India said that the bank has, in principle, decided to purchase assets and could start the process by April next year. “We have agreed in principle to start aggregating debt. We could either invest in them or try to sell to other asset reconstruction companies.” Central bankers to the rescue (The Hindu Business Line 24th Dec 2007) The central bankers of the world, who met in Cape Town in connection with the G-20 Conference early this month, appear to have decided on a series of actions to counter the effect of a severe credit squeeze, which has imposed serious risks on the US economy and hence the world in general. It is not the first time in recent years that the central bank...

Irda gives full pricing freedom to general insurers (Business Standard 20th Dec 2007) Insurance Regulatory Development Authority of India (Irda) has decided to give full pricing freedom to the general insurance companies from January 1, 2008. In a letter to the CEOs of general insurance companies, the regulator said that except for motor third party rates, insurers are free to quote the premium rates filed with Irda for all other lines of business (whether a new policy or a renewal policy). Banking stocks riding low on profit booking (The Hindu Business Line 20th Dec 2007)The banking stocks seem to be riding low on the back of profit booking in overvalued stocks. While the benchmark index Sensex has fallen by 6.30 per cent since a week, BSE-Bankex was down by 8.10 per cent during the same time. According to analysts, most frontline banking stocks have become highly overvalued and are trading at very high multiples, which seem to have put pressure on the whole sector.

Banks mull measures to curb bulk deposit growth (The Hindu Business Line 19th Dec 2007)With deposit accretions showing little signs of deceleration, banks are beginning to devise methods of discouraging bulk funds. About 30 per cent of deposits now come from bulk funds. Most of the bulk deposits were parked in short duration time deposits. Bankers said despite the informal cap on bulk rates by public sector banks, inflows still continued. Aggregate deposits between April and November this year has grown by Rs 3.44 lakh crore, against Rs 2.54 crore during the corresponding period the last financial year. Time deposits this year till November 30 grew by 3.25 lakh crore. ‘Rising rupee, inflows hit entire industry, not just exports’ (The Hindu Business Line 19th Dec 2007)The Prime Minister’s Council on Trade and Industry today discussed the adverse impact of rising rupee on exports and industry, besides the challenges of managing the surge in dollar inflows into the country. “We are hit ...

Sterlite, Morgan Stanley group front-runner for IFCI stake (Live mint.com 18th Dec 2007)A Sterlite Industries and Morgan Stanley consortium is the front-runner for picking up a 26% stake in IFCI Ltd. “After considering proposals received from three interested parties, Sterlite Industries and Morgan Stanely emerged as the lead player,” an IFCI official said late Monday night. He added a meeting of the board of the company was going on and more details would emerge after it ended. A CNBC-TV 18 report that cited unnamed sources claimed that the consortium had bid between Rs90 and Rs100 a share. It was not immediately possible to ascertain the overall value of the deal because IFCI’s capital restructuring is still in progress. Analysts had previously estimated the size of the deal at between $500 million and $700 million. The reported price per share is lower than the Rs108.4 close the share registered on the Bombay Stock Exchange on Monday. Rupee rise pinches govt projects (Business Stand...

SBI mulls VRS for 40K staff (Business Standard 17th Dec 2007) State Bank of India (SBI) is planning to introduce a voluntary retirement scheme (VRS) for its subordinate staff in the next financial year. The proposed scheme aims to give chance to over 40,000 employees, who find it challenging to work in a computerised environment and competitive market conditions. "The nature of work has changed substantially due to introduction of core banking solutions (CBS) and automation. Besides, the work demands on staff are growing enormously to retain market share. Some of the subordinate staff should get a decent exit option," a senior SBI official said. He, however, ruled out any VRS for the clerical or officer cadre. SBI's total employee base is around 2,00,000. The actual amount payable to employees opting for VRS will be determined by taking into account their number of years of service and the remaining period. IFCI likely to fix bond conversion at Rs 107 (Business Standard...

SBI cuts deposit rates again (Busienss Standard December 13, 2007) State Bank of India (SBI) has cut the peak term deposit rate by 25 basis points (bps) to 8.5 per cent for the second time in just over a month. It has also slashed rates on short-term deposits of less than a year by an identical margin to improve asset-liability management and reduce the cost of funds. The new rates are effective from December 12.

3 PSU banks mull rights issue (Business Standard 11th Dec 2007)Union Bank of India, Dena Bank, Oriental Bank of Commerce, the state-run lenders with the government stake below 55 per cent, will be considering rights issues to raise capital for meeting the Basel-II norms and support business growth. The government has given clearance for State Bank of India’s (SBI) proposed Rs 17,000 crore rights issue by agreeing to invest Rs 10,000 crore to maintain its stake at the current level of 59.73 per cent.

Bank officers to seek fixed working hours, pension (The Hindu Busienss Line 10th Dec 2007) The bank officers’ associations across the country will fight for fixed working hours and provision of pension, and against contractual appointments and mergers and acquisitions of banks.There is a need to take ... More 500% surge in complaints against banks (Live mint.com 10th Dec 2007) The quality of service in Indian banks has deteriorated badly since June 2006. Or customers have suddenly become more discerning. According to banking regulator the Reserve Bank of India, or RBI, the number of customer complaints increased by over 500% to 34,499 in the 12 months between July 2006 and June 2007. In the previous 12 months, the number of complaints was 5,772. None of the big banks has been spared: there were 8,597 complaints against the country’s largest bank, the state-owned State Bank of India Ltd; 5,048 complaints against the largest private sector bank ICICI Bank Ltd; and 1,182 complaints aga...

IFC considers buying up to 10% in IFCI (Live mint.com 7th Dec 2007) World Bank unit International Finance Corporation (IFC) may consider buying as much as 10% of IFCI Ltd, India’s oldest project financier, which is seeking a new investor. “We are in talks with IFCI,” Paolo Martelli, IFC’s regional director for South Asia, said on Thursday. IFCI, the third best performing stock on the Bombay Stock Exchange’s (BSE’s) 500 Index this year, plans to sell a 26% stake to a strategic investor to improve its financial performance and exit non-performing assets, or those that needed to be liquidated. The lender is also in talks with multilateral institutions.

RBI intervention halts rupee rise (The Economic Times 6th Dec 2007) The Reserve Bank of India’s (RBI) intervention through the day and dwindling foreign inflows caused the rupee’s fall on Wednesday. The rupee ended the day at 39.48/49 against the dollar, weakening from the Tuesday’s close of 39.42/43. Though there was not much activity from overseas investors, the overall sentiment in the market is high, because of the possible rate cut by the US Federal Reserve, which could possibly trigger a further set of overseas inflows. Gains on the stock market have also helped the market sentiment. IFCI asks bidders to discount govt aid (The Economic Times 6th Dec 2007) The IFCI board has ruled out government assistance up to Rs 1,300 crore due this fiscal. The strategic investor in IFCI must discount government’s support of up to Rs 1,300 crore, when making the final bid. The IFCI management has decided to communicate as much to the bidders, that this subsidy should be ruled out while arrivi...