Category: Banking & Finance

SoftBank shares jump 11% on $9 billion buyback, BFSI News, ET BFSI

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TOKYO – SoftBank Group Corp shares jumped 10.5% on Tuesday, the first trading session after the Japanese conglomerate said it would spend up to 1 trillion yen ($8.8 billion) buying back almost 15% of its shares.

The company announced the buyback, long speculated about by the market, after it revealed its quarterly earnings crashed to a loss amid a decline in the share prices of its portfolio companies and a regulatory crackdown in China.

SoftBank‘s shares closed at 6,808 yen in its biggest daily rise in 11 months, lifting the group’s market capitalization above $100 billion. Tuesday’s trading volume was more than twice the 30-day average.

The buyback is SoftBank’s second largest after a record 2.5 trillion yen buyback launched during the depths of the COVID-19 pandemic last year. Shares of the tech group quadrupled during that buyback, but have since fallen 40% from a peak in May.

“Our analysis of buyback history indicates that SBG stock performs (and outperforms indices or BABA) during buybacks,” wrote Jefferies analyst Atul Goyal in a note, referring to Alibaba, the group’s largest asset. SoftBank owns about a quarter of Alibaba’s shares.

The slide in the Chinese e-commerce giant’s shares and the broader regulatory backlash in China contributed to a $57 billion fall in SoftBank’s net assets to $187 billion, a metric that Chief Executive Masayoshi Son has said is the primary measure of SoftBank’s success.

(For graphic on Buyback dependence Buyback dependence: https://graphics.reuters.com/SOFTBANKGROUP-SHARES/byprjkkkdpe/chart.png)

The repurchase period for the latest buyback runs to Nov. 8 next year, with the group signalling the programme could take longer than the fast-paced purchases last year.

The buyback “is nice support, but it isn’t rocket fuel,” wrote LightStream Research analyst Mio Kato on the Smartkarma platform, adding “there are material downside risks if broader tech, especially unprofitable tech, falters.”

Speculation that SoftBank could launch a buyback has been raging for months as the discount – the gap between the value of its assets and its share price – has lingered to the frustration of executives and as investors push for repurchases.

Ongoing uncertainties include the prospect of gaining regulatory approval for the $40 billion sale of chip designer Arm to Nvidia.

Delays to the sale “may have given Softbank the flexibility to announce a buyback now with expectations of ramping up share purchases later,” Redex Research analyst Kirk Boodry wrote in a note.

SoftBank is ramping up investing via Vision Fund 2, which has $40 billion in committed capital from the group and Son himself, even as it winds down activity at trading arm SB Northstar.

“Even if the company manages its finances with a certain amount of discipline, share buybacks would likely erode the financial buffer if executed,” S&P Global Ratings analysts wrote in a note.

The conglomerate held more than 5 trillion yen in cash and cash equivalents at the end of September, an increase of 9% compared to six months earlier.

($1 = 113.3500 yen)



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UTI International launches India Sovereign Bond ETF

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UTI International has launched an Indian Government Bond ETF listed on the Amsterdam Stock Exchange.

The sovereign bond ETF will track performance of the Nifty India Select 7 Government Bond index, which comprises of top seven most-liquid, local currency sovereign bonds issued by the Centre.

The index has been specifically created by NSE Indices. The index methodology is uniquely designed for global investors considering favourable factors such as high secondary market liquidity, high unutilised limits for Foreign Portfolio Investors and also giving preference to government bonds categorised under the Fully Accessible Route by RBI. BofA Securities has provided seed capital and has been appointed as Authorized Participant.

The UTI India Sovereign Bond ETF is domiciled in Ireland and structured in compliance with the European regulatory framework of UCITS (Undertaking for Collective Investments in Transferable Securities).

The investment manager of the ETF is UTI International, the Singapore-based subsidiary of UTI Asset Management Company.

This ETF will allow global investors to access India’s vibrant government securities market without having to deal with the complex access procedures typically associated with Indian fixed income.

Vibrant bond market

As India becomes increasingly relevant on the global investment landscape, investors will seek Indian yield in addition to equity returns. While India is presently not included in global fixed income benchmarks, this ETF could mark an inflection point in recognition of India’s bond markets.

Imtaiyazur Rahman, CEO of UTI AMC said the ETF will connect the country’s fixed income markets with the world and drive global investments to India.

Vikram Limaye, Managing Director and CEO, NSE said innovation in financial products is important for the development of Indian capital markets and the product provides a play at the intersection of yield and liquidity – two key variables for global investors.

It is an important stepping stone towards attracting global money in Indian government securities market through the ETF route, he said.

Jayesh Mehta, Managing Director & Country Treasurer, Bank of America N.A., India said India is one of the last remaining large investment grade rated economies whose sovereign bonds are under-owned by institutional investors.

The ETF structure will raise market awareness of Indian sovereign bonds as an asset class and improve accessibility at a time when global investors are seeking to diversify yield opportunities, he added

The ETF will be listed on Euronext Amsterdam AEX initially and then possibly other exchanges in Europe and Asia.

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All banks will soon consider offering crypto trade, says former Citi CEO Vikram Pandit, BFSI News, ET BFSI

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Vikram Pandit, the Indian-born former CEO of Citigroup Inc and co-founder of Orogen Group, has said that banks and traditional financial institutions will soon start thinking of offering cryptocurrencies.

Pandit aired his view on the future of cryptocurrencies in an interview at a Singapore Fintech Festival. Vikram Pandit noted that in a few years to come large banks and other financial institutions will start offering crypto services directly to their customers.

“In one to three years, every large bank and, or securities firm is going to actively think about ‘shouldn’t I also be trading and selling cryptocurrency assets?”, he asked.

Vikram Pandit is a popular investor and a long-time admirer of cryptocurrencies, he has previously largely invested in one of the leading cryptocurrency exchanges, Coinbase.

The investor expects the introduction of digital assets to be an upgrade to the paper-based banking system to make the exchange process more suitable.

Banks bet on crypto

Meanwhile, banks and other financial institutions are already taking steps and seeking ways to enter the crypto industry.

As per a recent report, banks are now paying a 50% premium to employ crypto talents. The banks are making this move because they risk losing their customers to other banks or financial institutions that offer these crypto services.

According to data collected by Revelio Labs, a workforce intelligence company, Wells Fargo, Goldman Sachs, Citibank, and Morgan Stanley are among the companies hiring these crypto talents.

Coinfomania reported last week that Australia’s Commonwealth Bank (CBA) is set to become the first banking institution in the country to offer crypto services to its clients.

The bank noted that it will allow its customers the ability to buy, sell and hold digital assets, directly via the CommBank app.

With the country’s financial watchdog looking into the regulatory implications of the bank’s move, CBA has said it would welcome clear regulatory guidelines for crypto assets.

However, while these traditional financial systems are offering clients exposure to crypto assets, none of them has decided to trade crypto directly to their clients, and that is about to change soon, according to Pandit.



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Credit card spends sparkle on festive rush in October, November, BFSI News, ET BFSI

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Credit card spends are seen hitting record highs in October and November as the COVID-19 wave ebbs and festive euphoria sets in. As per trends, it has grown 17 per cent in October and 11 per cent in November.

Spending traction is evident from the record absolute spends and the ratio of credit card to debit card spend, which stands at 1.28x. October is likely to be 15-18% better than September while November’s first-week run rate has been better than October, according to ICICI Securities.

September jump

Credit card spends jumped 60 per cent year-on-year (YoY) in September, helped by the onset of the festive season. However, on a sequential basis the growth slowed down to 3 per cent at Rs 80,500 crore in September.

Spends grew strongly at 60% year on year (+16% on a two-year CAGR basis). Kotak Mahindra Bank reported the highest growth (27% MoM) in September, followed by IndusInd Bank and ICICI Bank (13% each).

Other major players reported growth in the +-4% range. On a two-year CAGR basis, spends for ICICI Bank grew 58%, IndusInd 33%, Kotak Mahindra Bank 29%. HDFC Bank and SBI Cards posted growth of 10–15% and Axis Bank and SCB 2–3%. On the other hand, Citi and Amex saw declines of 8% and 26% respectively. ICICI Bank surpassed SBI Cards to become the second-largest player in spends, with market share of 19.3% over 6MFY22.

Outstanding credit cards up 10.8%

The total number of outstanding credit cards in the system grew 10.8% YoY to 65 million in September 2021 – the highest in the past 11 months. Among the major players, ICICI Bank reported strong growth of 26.1% YoY, followed by IndusInd Bank (15.6%), SBI Cards (14.3%). Foreign players such as American and Citi witnessed decline of 10% and 5% respectively. SBI Cards and ICICI Bank continued to perform strongly, resulting in a 59–218 bps YoY increase in market share to 19.3% and 18.0% respectively in September.

ICICI Bank added close to 2 million new cards in the past 10 months, taking its credit card base to 11.6 million as of September. Despite a 247 bps year on year decline, HDFC Bank remained the largest player with a market share of 23.0%.

Around 10.91 lakh new cards were added to the system in September with HDFC Bank being the largest acquirer at 2.44 lakh cards.



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Namdev Finvest eyes eight-fold AUM growth by March 2024

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Namdev Finvest Pvt Ltd (NFPL) is eyeing an eight-fold increase in its assets under management (AUM), to touch at least ₹2,000 crore, by March-end 2024 even as it expects the recent $4.7-million fund raise to lead to a rating upgrade.

Once the Jaipur-based non-banking finance company (NBFC) — which is focused on the micro, small and medium enterprises (MSME) sector — attains the targeted AUM, it will be better placed for co-lending tie-ups with large banks, its top officials said. Its current AUM value is about ₹270 crore.

Jitendra Tanwar, MD and CEO, said the company’s USP is providing funding on time to existing as well as new entrepreneurs in the MSME segment.

NBFCs: No need to press the panic button yet

“Our turnaround time is 7-10 days. So, within 10 days we disburse money to the customer.

“We also educate our customers about the importance of using banking facilities, as far as possible, avoid cash transactions, and route payments through digital payment apps,” he said.

Tanwar said NFPL encourages those at the bottom of the pyramid to start their business and grow it.

According to CARE Ratings, the NBFC’s loan portfolio is moderately diversified with the ‘loan against property’ portfolio and SME loans (secured) comprising 80 per cent, two-wheeler loans 16 per cent, new or used four-wheeler loans 3 per cent and gold loans 1 per cent.

NBFC regulation needs to be strengthened

NFPL received private equity investment (A series) of around $4.7 million in September 2021 from Belgium-based Incofin Investment Management, via its India Progress Fund.

The company, which has operations in Rajasthan, Punjab, Delhi and Gujarat, expects CARE Ratings to take into account the capital infusion when it updates its rating, which is currently at ‘BBB-’. An ‘A’ rating will help NFPL tap the debt capital market, said a company official.

On the importance of reaching the ₹2,000-crore milestone, PH Ravikumar, Director, said that co-lending becomes meaningful when there is a minimum monthly loan origination.

“When it comes to microfinance or MSMEs, the ability of specialised NBFCs like Namdev Finvest to spot, manage and contain the risk is much better than that of large banks. NBFCs have the skill sets, local focus, and local intelligence,” he said.

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HSBC exceeds China wealth hiring targets, explores India private banking re-entry, BFSI News, ET BFSI

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HSBC Holdings Plc is ahead of its hiring targets for its Chinese retail wealth management business and is exploring re-entering India’s private banking business, senior executives said, as part of its plan to make Asia and wealth key pillars of growth.

Under a strategy spearheaded by Group CEO Noel Quinn, HSBC is ploughing $3.5 billion into its wealth and personal banking business, in line with its ambition to become Asia’s top wealth manager by 2025.

“We are the leading international bank in China, so we want to squeeze that opportunity,” said CEO of Wealth and Personal Banking Nuno Matos, one of four top executives moving to Hong Kong from London this year as part of the bank’s regional pivot.

“On the private banking side, we are now in clear expansion mode,” Matos told Reuters in one of his first interviews since moving to the region.

Asia is the biggest region for HSBC, and the wealth and personal banking unit contributed 44% or $22 billion to London-headquartered HSBC’s adjusted global revenue last year.

The bank is looking to boost its mobile wealth planning service, HSBC Pinnacle, in China by having about 700 personal wealth planners by the year-end instead of the 550 originally planned, Matos said.

HSBC’s wealth management services include investments, insurance and asset management products, while private banking caters to the needs of those with investible assets of $5 million or more.

The bank had 20 people operating in China onshore private banking business at the end of last year, said Siew Meng Tan, head of HSBC Private Banking for Asia Pacific.

“By the end of this year, we will get to 64 and by the end of next year, we’ll double that,” she said.

HSBC is exploring whether to re-enter onshore private banking in India, where the ranks of the super rich are growing fast and record high stock markets have created a string of billion dollar start-ups.

HSBC exited the Indian private banking business in 2015 as part of a group strategy. The lucrative but very competitive Indian market has few foreign players.

“We want to bank mass affluent and high net worth customers. At this moment, the two major pillars we are expanding in India are insurance and asset management,” Matos said. “On the private banking side, we are not there yet and that’s something that demands a strategic decision this year.”

Currently, HSBC is focusing on catering to wealthy Indians from its global hubs in Singapore, London and the Middle East.

‘COMPELLING OPPORTUNITY’

HSBC is also looking to bulk up its Singapore and Southeast Asia presence, Matos said. In August, the bank bought French insurer AXA’s Singapore assets for $575 million.

Though HSBC has a dominant Asia presence with its retail banking, particularly in the financial hub of Hong Kong, global leaders such as UBS and Credit Suisse rule the market for wealthier clients.

Global wealth managers remain bullish about their growth prospects in China despite an unprecedented regulatory crackdown in the world’s second-largest economy.

In a global wealth report published in June, Boston Consulting Group said Asia’s wealth management revenue pools will soar faster than any other market worldwide, nearly doubling over the next five years to $52 billion.

“Asian wealth is expanding twice as fast as the rest of the world. This is a compelling opportunity for us,” said Matos, who took charge of HSBC’s newly combined division in February.

“I’m not going to re-do now our goals but what I can say is that in 2021, we will over-deliver our goals on the wealth side,” he said.

After announcing plans last year to buy out its life insurance joint venture partner in China, HSBC is also keen to gain full control of its asset management company in the country, Matos said. (Reporting by Anshuman Daga; Editing by Sumeet Chatterjee and Lincoln Feast.)



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Hiring in banks up 25% to cater to rising loan demand, BFSI News, ET BFSI

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Banks are stepping up hiring to cater to the growing demand for home loans. Hiring has gone up 22-25% in the last few months across urban and rural markets as demand for home loans has surged, according to various reports.

About 90 per cent of the requirement is in the sales function, with starting salaries of Rs 15,000 to Rs 20,000, along with incentives. Hiring is across the board at NBFCs, small finance banks and non-banking finance companies, and hiring costs are rising as employees are shifting jobs within the sector.

NBFCs

Shriram Group is hiring 5,000 across its many companies, while ICICI Home Finance is looking to onboard 600 employees by December.

The Shriram Group is recruiting mainly in south and north India, across tier 3-4 cities. Shriram City Union Finance is expanding its gold loan business,

while Shriram Housing Finance is expanding primarily in Andhra Pradesh and Telangana.

Banks

HDFC Bank is aiming to reach 200,000 villages in the next 24 months, and plans to hire more than 2,500 people in the next six months.

The bank aims to double its presence in the next 18-24 months through a combination of branch network, business correspondents, business facilitators, CSC (common service centres) partners, virtual relationship management and digital outreach platforms.

The bank will hire 500 relationship managers to expand the coverage of its Micro, Small and Medium Enterprises (MSME) vertical to 575 districts or more by the end of this fiscal. Out of these, half will be for the small and medium sub-vertical, which already has a headcount of 975. This hiring will take the private bank’s MSME vertical headcount to 2,500. India’s largest private sector lender had an employee strength of around 1.23 lakh as of June.

Credit Suisse has plans to hire over 1,000 staff in India this year for a technology innovation office, while Deutsche Bank is looking to hire 1,000 people in India, including 300 graduates and 700 lateral hires. Meanwhile, Kotak Mahindra Bank has resumed its hiring process, and has reached near pre-Covid levels.

Data analysts

From banking to FinTech companies, data analysts are in demand. These companies are looking for professionals who can handle data using technology and glean relevant information from it.

FinTechs are also beefing up marketing and sales teams and are looking beyond commerce and engineering backgrounds with a background in data analysis, artificial intelligence and exceptional soft skills. They are looking to pay higher salaries who have Big Data, advanced analytics and financial skills.



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Notices sent to Dish TV, YES Bank; UP Police freezes bank’s stake in DTH firm, BFSI News, ET BFSI

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The crime branch of the Gautam Buddha Nagar in Uttar Pradesh has sent notices to Dish TV and private sector lender Yes Bank under Section 102 of the CrPC and taken custody of the shares held by the bank in the direct-to-home (DTH) firm.

The local police have also formed a special investigation team under the direction of the commissioner of police, Gautam Buddha Nagar, to investigate an FIR lodged on September 12, 2020, on a complaint by Subhash Chandra, chairman of the Essel Group.

The notice was issued on November 5, by Girish Prasad Raj, the in-charge inspecting officer of enquiry. As per the notice, a copy of which was accessed by ET, the police have taken custody of the 44,53,48,990 shares of Dish TV (amounting to over 24.19% stake), which are currently with YES Bank.

After the notice, Yes Bank has been restrained from any transaction of these shares or exercising any rights as a shareholder till further orders or until completion of the investigation.

Replying to an ET query, a YES Bank spokesperson said, “As a matter of policy, we don’t revert on client-specific issues and actions being taken by the bank. However the bank is not in receipt of any such notice from any authority at this point in time.”



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