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Banks
FY12 Budget Impact: small positive
• Budget 2011-12 was a small positive for banks/financials with a
positive surprise in the fisc, increased benefits for mortgages and a
hint of faster financial sector reforms. The positive headline fiscal
deficit, however, is dependent on strong growth and tax buoyancy.
• Increase in PSL ceiling for mortgages: The ceiling for a loan to be
considered as a priority sector loan raised from Rs2.0mn to Rs 2.5mn.
This is a strong benefit for HFCs like HDFC and ICICI/SBI too.
• Taxation of debt funds: Taxation for corporates in debt funds have
been increased by 5%/10% and are now identical to bank deposits. This
is negative for MFs but positive for banks.
• Movement on insurance FDI change. The proposal to table the
amendment to the Insurance Laws Bill in the budget session would
increase the foreign investment limit to 49% from 26%. Minor positive
for lifecos, mainly as a listing-enabler: HDFC, ICICI, SBI from our
coverage impacted. MAX, ABNL, RCAPT are other beneficiaries.
• Deficit lower, but based on high growth expectations: Projected fiscal
deficit at 4.6% and net borrowing of Rs3.4bn was a ~10% positive
surprise and is good for liquidity, rates and bond yields. We note the high
dependence on high growth and strong tax buoyancy.
• Capital infusion for PSU banks: Rs60bn allocation for PSU bank
capital in FY12 (~Rs200bn in FY11), mentions a target of minimum
58% stake in all PSU banks. There is no allocation to SBI’s rights issue.
BOB gets diluted with estimated ~200bps ROE and 7-8% EPS impact.
• New bank licenses imminent. Guidelines for new banking licences
would be granted by end of FY11. The RBI would make the final
decision on allowing corporates to bid for these, but the Economic
Survey makes a clear case for corporate entry into banking.
• Further incentives for Infra Funding: Proposes to set up Infra Debt
funds to attract foreign capital with withholding tax at just 5% v/s 20%
currently and extension of Infra bond window in FY12 - Debt fund
positive for IDFC, Infra bond extension largely expected.
• No game-changing proposals. We maintain our near-term cautious
stance on the sector as the curve remains inverted but believe that
valuations are undemanding for the sector and improving liquidity and
Macro in 2HCY11 would drive positive returns in the second half of
CY11. ICICI Bank/HDFC Bank/HDFC are our top picks.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Banks
FY12 Budget Impact: small positive
• Budget 2011-12 was a small positive for banks/financials with a
positive surprise in the fisc, increased benefits for mortgages and a
hint of faster financial sector reforms. The positive headline fiscal
deficit, however, is dependent on strong growth and tax buoyancy.
• Increase in PSL ceiling for mortgages: The ceiling for a loan to be
considered as a priority sector loan raised from Rs2.0mn to Rs 2.5mn.
This is a strong benefit for HFCs like HDFC and ICICI/SBI too.
• Taxation of debt funds: Taxation for corporates in debt funds have
been increased by 5%/10% and are now identical to bank deposits. This
is negative for MFs but positive for banks.
• Movement on insurance FDI change. The proposal to table the
amendment to the Insurance Laws Bill in the budget session would
increase the foreign investment limit to 49% from 26%. Minor positive
for lifecos, mainly as a listing-enabler: HDFC, ICICI, SBI from our
coverage impacted. MAX, ABNL, RCAPT are other beneficiaries.
• Deficit lower, but based on high growth expectations: Projected fiscal
deficit at 4.6% and net borrowing of Rs3.4bn was a ~10% positive
surprise and is good for liquidity, rates and bond yields. We note the high
dependence on high growth and strong tax buoyancy.
• Capital infusion for PSU banks: Rs60bn allocation for PSU bank
capital in FY12 (~Rs200bn in FY11), mentions a target of minimum
58% stake in all PSU banks. There is no allocation to SBI’s rights issue.
BOB gets diluted with estimated ~200bps ROE and 7-8% EPS impact.
• New bank licenses imminent. Guidelines for new banking licences
would be granted by end of FY11. The RBI would make the final
decision on allowing corporates to bid for these, but the Economic
Survey makes a clear case for corporate entry into banking.
• Further incentives for Infra Funding: Proposes to set up Infra Debt
funds to attract foreign capital with withholding tax at just 5% v/s 20%
currently and extension of Infra bond window in FY12 - Debt fund
positive for IDFC, Infra bond extension largely expected.
• No game-changing proposals. We maintain our near-term cautious
stance on the sector as the curve remains inverted but believe that
valuations are undemanding for the sector and improving liquidity and
Macro in 2HCY11 would drive positive returns in the second half of
CY11. ICICI Bank/HDFC Bank/HDFC are our top picks.
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