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India Equity Research Reports, IPO and Stock News
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Takeaways-management meeting and interviews
Six Indian financials presented at the 18th CLSA Investor Forum (HK) last week-
Axis Bank, HDFC Bank, HDFC Ltd, ICICI Bank, IDFC and Yes Bank. The key
commentary from the management of most financials was that while the credit
demand is slowing, credit quality is still holding-up. Banks are seeing stronger
moderation in demand for credit towards corporate capex and retail auto loans.
However, demand for working capital loans and mortgages continues to see
healthy growth. ICICI’s discussion on the stress-test results of its power sector
exposure, which indicated low stress levels, should add confidence on its asset
quality. CASA growth is becoming a challenge due to rise in interest rates, but
recent hike in lending rates and stable competitive environment should help to
sustain/ improve margins from 1QFY12 levels. Over the longer term, most banks
plan to strengthen their client relationships and retail liability franchise.
Sector round-up– RBI maintains anti-inflation stance
In the last mid-quarter review on monetary policy, RBI raised policy rate by 25bps
to counter inflationary pressures- cumulatively it raised rates by 400bps starting
Mar-10. As a result, most market rates have moved-up by 10-25bps, but yields on
the 10 year G-Secs have remained stable at 8.3%; only a few banks have raised
lending rates. During the last month, Sensex fell by 1%, but banks outperformed
(up 1%). We maintain our selective stance on the sector with preference for
banks with lower exposure to risky sectors and higher ROA- ICICI Bank and HDFC
Bank are our top picks.
Update on insurance and mutual funds- Jul-11/ Aug-11
During Jul-11, NBP of sector grew by 11% YoY, largely driven by 62% growth of
LIC (bounce-back after 41% fall in Jun-11); private players reported 38% fall. In
Aug-11, AUMs of mutual funds fell by 4% MoM to Rs7tn (down 2% YoY) due to fall
in debt AUMs, but equity schemes reported strong net inflows of Rs21bn.
Regulatory and sector newsflows
The Reserve Bank of India has raised the repo rate by 25bps from 8% to
8.25% in its mid-quarter review.
RBI raised rates to
counter inflationary
expectations
Banks have agreed to a 10-point agenda to improve customer service
levels which includes discontinuation of pre-payment charges on floating
rate loans; banks can continue to levy such fees on fixed-rate loans.
The RBI governor has stated that from a longer term perspective Indian
bank’s reserve requirements (CRR and SLR) should come down from
current level of 30%.
Reserve requirement for
banks may fall in the
longer term
RBI has tightened disclosure norms for NBFCs under which they will have
to make disclosures more frequently about their lending and deposit
activities.
The National Housing Bank (NHB) is exploring the possibility of setting up
a credit enhancement company to facilitate fund raising by mortgage
firms.
NHB has raised the provisioning requirements for doubtful loans for
housing finance companies and also asked them to set aside 0.4% of
total standard housing loans as well.
NHB has raised the
provisioning
requirements for doubtful
loans for HFCs
As per a media report, the Insurance Regulatory and Development
Authority (IRDA) may introduce a minimum death-benefit requirement
for traditional life insurance policies.
RBI may permit banks and NBFCs to RBI may permit banks to set-up infrastructure debt funds.
set-up infrastructure debt
funds Company newsflows
Axis Bank’s board has approved the revised deal structure for the
acquisition of the investment banking and equities businesses of Enam
Securities.
Axis Bank’s board has
approved acquisition of
Enam
Asset Reconstruction Company India Ltd (ARCIL, unlisted), has restated
its financial accounts for FY11 as the RBI raised reservations on its
accounting policy relating to recognition of income on accrual basis.
HDFC has introduced a new dual-rate mortgage product that gives
borrowers the option to lock into current interest rates for the next three
or five years and move to floating rate thereafter.
HDFC has introduced a
new dual-rate mortgage
product.
SBI will offer 25bps discount on its mortgage loans ahead of the festive
season and in order to compete well with HDFC Ltd and ICICI Bank.
SBI lowers mortgage rate
by 25bps
ICICI Securities, the investment banking subsidiary of ICICI Bank, has
signed an agreement with Oppenheimer & Co to cooperate on business
opportunities in both the countries.
The RBI has notified that Union Bank of India and Karur Vysya Bank
(KYB) are being removed from RBI’s caution list for FIIs' investment.
As per media reports, the finance ministry has agreed to infuse about
Rs30bn as capital in State Bank of India to meet the bank's near-term
capital needs.
SBI may reportedly get a
small capital infusion
SBI has announced that it has doubled its Medium Term Note (MTN)
program to US$10bn to fund overseas business.
Yes Bank has entered into an alliance with Malayan Banking Berhad to
collaborate on cross-border investment banking advisory.
ICICI Bank plans to raise funds through foreign currency bonds in the
coming quarters.
Interesting interviews
Dr. Subir Gokarn (Dy. Governor, R RBI is close to the end of BI)- (click here for full article)
its record series of
interest rate increases
You could say that the cycle is nearing its end given the projection that inflation will start
coming down and will continue to move down from December onwards. The inflation rate
will drop because oil prices do not appear to be going higher and we are seeing some
deceleration in domestic growth because demand is being moderated.
Mr. HD Khunteta (CMD, Rural Electrification Corp)- (click here for full article)
None of the states have
so far defaulted to us
We have sanctioned loans only for those projects where at least 70% generation capacity
will be sold under a power purchase agreement, on a long-term basis. From April 1, we have
been insisting on a fuel supply and a power purchase agreement having been signed
already, without which no disbursement will take place. Earlier, we sanctioned loans on the
basis of a commitment of coal linkage. None of the states have so far defaulted to us.
Ms. Chanda Kochhar (MD, CEO, ICICI Bank) (click here for full article):
We expect the banking
sector to grow by 16-18%
this year.
With GDP growth in the region of around 8% or so, you can still expect the banking sector
to grow anywhere between 2 to 2.5 times the GDP growth rate. So anywhere between 16%
and 18%, I think still the banking sector can grow. Yes, there is some amount of moderation
in all sectors, whether it is demand for housing loans or car loans or for new investment
announcements for that matter.
Mr. RM Malla (Chairman & MD, IDBI Bank) (click here for full article):
Banks will wait before
raising lending and
deposit rates
Most banks have hiked their base rate by about 50bps just last month. Banks have to watch
two things, one of course is the credit off take and the other is how much money they need
to raise through deposits. I get a sense that most of the banks will have a policy of waiting
for few days before they take a view on increasing their deposit rate as well as the lending
rates.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Takeaways-management meeting and interviews
Six Indian financials presented at the 18th CLSA Investor Forum (HK) last week-
Axis Bank, HDFC Bank, HDFC Ltd, ICICI Bank, IDFC and Yes Bank. The key
commentary from the management of most financials was that while the credit
demand is slowing, credit quality is still holding-up. Banks are seeing stronger
moderation in demand for credit towards corporate capex and retail auto loans.
However, demand for working capital loans and mortgages continues to see
healthy growth. ICICI’s discussion on the stress-test results of its power sector
exposure, which indicated low stress levels, should add confidence on its asset
quality. CASA growth is becoming a challenge due to rise in interest rates, but
recent hike in lending rates and stable competitive environment should help to
sustain/ improve margins from 1QFY12 levels. Over the longer term, most banks
plan to strengthen their client relationships and retail liability franchise.
Sector round-up– RBI maintains anti-inflation stance
In the last mid-quarter review on monetary policy, RBI raised policy rate by 25bps
to counter inflationary pressures- cumulatively it raised rates by 400bps starting
Mar-10. As a result, most market rates have moved-up by 10-25bps, but yields on
the 10 year G-Secs have remained stable at 8.3%; only a few banks have raised
lending rates. During the last month, Sensex fell by 1%, but banks outperformed
(up 1%). We maintain our selective stance on the sector with preference for
banks with lower exposure to risky sectors and higher ROA- ICICI Bank and HDFC
Bank are our top picks.
Update on insurance and mutual funds- Jul-11/ Aug-11
During Jul-11, NBP of sector grew by 11% YoY, largely driven by 62% growth of
LIC (bounce-back after 41% fall in Jun-11); private players reported 38% fall. In
Aug-11, AUMs of mutual funds fell by 4% MoM to Rs7tn (down 2% YoY) due to fall
in debt AUMs, but equity schemes reported strong net inflows of Rs21bn.
Regulatory and sector newsflows
The Reserve Bank of India has raised the repo rate by 25bps from 8% to
8.25% in its mid-quarter review.
RBI raised rates to
counter inflationary
expectations
Banks have agreed to a 10-point agenda to improve customer service
levels which includes discontinuation of pre-payment charges on floating
rate loans; banks can continue to levy such fees on fixed-rate loans.
The RBI governor has stated that from a longer term perspective Indian
bank’s reserve requirements (CRR and SLR) should come down from
current level of 30%.
Reserve requirement for
banks may fall in the
longer term
RBI has tightened disclosure norms for NBFCs under which they will have
to make disclosures more frequently about their lending and deposit
activities.
The National Housing Bank (NHB) is exploring the possibility of setting up
a credit enhancement company to facilitate fund raising by mortgage
firms.
NHB has raised the provisioning requirements for doubtful loans for
housing finance companies and also asked them to set aside 0.4% of
total standard housing loans as well.
NHB has raised the
provisioning
requirements for doubtful
loans for HFCs
As per a media report, the Insurance Regulatory and Development
Authority (IRDA) may introduce a minimum death-benefit requirement
for traditional life insurance policies.
RBI may permit banks and NBFCs to RBI may permit banks to set-up infrastructure debt funds.
set-up infrastructure debt
funds Company newsflows
Axis Bank’s board has approved the revised deal structure for the
acquisition of the investment banking and equities businesses of Enam
Securities.
Axis Bank’s board has
approved acquisition of
Enam
Asset Reconstruction Company India Ltd (ARCIL, unlisted), has restated
its financial accounts for FY11 as the RBI raised reservations on its
accounting policy relating to recognition of income on accrual basis.
HDFC has introduced a new dual-rate mortgage product that gives
borrowers the option to lock into current interest rates for the next three
or five years and move to floating rate thereafter.
HDFC has introduced a
new dual-rate mortgage
product.
SBI will offer 25bps discount on its mortgage loans ahead of the festive
season and in order to compete well with HDFC Ltd and ICICI Bank.
SBI lowers mortgage rate
by 25bps
ICICI Securities, the investment banking subsidiary of ICICI Bank, has
signed an agreement with Oppenheimer & Co to cooperate on business
opportunities in both the countries.
The RBI has notified that Union Bank of India and Karur Vysya Bank
(KYB) are being removed from RBI’s caution list for FIIs' investment.
As per media reports, the finance ministry has agreed to infuse about
Rs30bn as capital in State Bank of India to meet the bank's near-term
capital needs.
SBI may reportedly get a
small capital infusion
SBI has announced that it has doubled its Medium Term Note (MTN)
program to US$10bn to fund overseas business.
Yes Bank has entered into an alliance with Malayan Banking Berhad to
collaborate on cross-border investment banking advisory.
ICICI Bank plans to raise funds through foreign currency bonds in the
coming quarters.
Interesting interviews
Dr. Subir Gokarn (Dy. Governor, R RBI is close to the end of BI)- (click here for full article)
its record series of
interest rate increases
You could say that the cycle is nearing its end given the projection that inflation will start
coming down and will continue to move down from December onwards. The inflation rate
will drop because oil prices do not appear to be going higher and we are seeing some
deceleration in domestic growth because demand is being moderated.
Mr. HD Khunteta (CMD, Rural Electrification Corp)- (click here for full article)
None of the states have
so far defaulted to us
We have sanctioned loans only for those projects where at least 70% generation capacity
will be sold under a power purchase agreement, on a long-term basis. From April 1, we have
been insisting on a fuel supply and a power purchase agreement having been signed
already, without which no disbursement will take place. Earlier, we sanctioned loans on the
basis of a commitment of coal linkage. None of the states have so far defaulted to us.
Ms. Chanda Kochhar (MD, CEO, ICICI Bank) (click here for full article):
We expect the banking
sector to grow by 16-18%
this year.
With GDP growth in the region of around 8% or so, you can still expect the banking sector
to grow anywhere between 2 to 2.5 times the GDP growth rate. So anywhere between 16%
and 18%, I think still the banking sector can grow. Yes, there is some amount of moderation
in all sectors, whether it is demand for housing loans or car loans or for new investment
announcements for that matter.
Mr. RM Malla (Chairman & MD, IDBI Bank) (click here for full article):
Banks will wait before
raising lending and
deposit rates
Most banks have hiked their base rate by about 50bps just last month. Banks have to watch
two things, one of course is the credit off take and the other is how much money they need
to raise through deposits. I get a sense that most of the banks will have a policy of waiting
for few days before they take a view on increasing their deposit rate as well as the lending
rates.
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