Concerns ahead despite good Q3 results

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Third quarter results of banks have indicated banks show a rise in net profit but concerns are evident ahead. Bank of Baroda reported a standalone net profit of ₹1,061 crore in the third quarter against a net loss of ₹1,407 crore in the year-ago quarter. Private sector lender ICICI Bank reported a 19.1 per cent increase in its standalone net profit in the third quarter of the fiscal at ₹4,939.59 crore.

The bank had a net profit of ₹4,146.46 crore in the same period last fiscal. However, Axis Bank reported a 36.4 per cent drop in its net profit in the third quarter this fiscal despite a robust rise in net interest income as provisions rose sharply. For the quarter ended December 31, 2020, Axis Bank’s standalone net profit stood at ₹1,116.60 crore as against ₹1,757 crore in the same period a year ago.

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Economic Survey: Governance, key to end zombie lending

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The Economic Survey 2020-21 has raised the issue of zombie lending. It has noted that apart from from re-capitalising banks, it is important to enhance the quality of their governance.

“Ever-greening of loans by banks as well as zombie lending is symptomatic of poor governance, suggesting that bank boards are ‘asleep at the wheel’ and auditors are not performing their required role as the first line of defence,” it said, adding that to avoid ever-greening and zombie lending following the current round of forbearance banks should have fully empowered, capable boards.

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How Bajaj Allianz Life’s agency channel revved up to face pandemic woes

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A strong show by its agency channel in December 2020 has raised the confidence of Bajaj Allianz Life Insurance over meeting its last fiscal year performance despite the Covid-induced lockdown challenges impacting business during 2020-21, a top official said.

In December 2020, the agency channel recorded 23 per cent growth in Rated New Business at ₹131 crore as compared to ₹107 crore in same month in previous year. This is even as there was de-growth of about 12 per cent in the agency channel’s contribution during April – December 2020. In terms of the number of policies, there was a year-on-year growth of 10 per cent for the agency channel in December 2020, largely due to increased demand for term policies.

Key challenge

“When the pandemic happened, the biggest worry for us was that face to face meeting with customers was a complete no. As agency channel, how would our agents go and do basic work was a big question mark for us. Thankfully, all the investments we had done to create a digital agency really helped and we could get back to our prime objective of putting our insurance consultants back in action. It’s technology usage that saved the day for us and our agents,” Sameer Joshi, Chief Agency Officer, Bajaj Allianz Life Insurance, told BusinessLine.

Also read: Bajaj Allianz launches ‘BAGIC GOQii Co-pay Option’ under regulatory sandbox

Bajaj Allianz Life Insurance’s agency force including point of sale persons stood at 1.08 lakh, of which number of agents (excluding POSP) stood at 80,886 persons. In December 2020, the company onboarded 3,000 agents, which is a credible performance given that not a single new agent was onboarded for the first five months this fiscal.

“So far this fiscal, Bajaj Life Insurance has added 12,000 agents. This is a good achievement given that we lost some critical time. We are hopeful of crossing last year’s count. We are now almost at pre-Covid level in terms of business activity,” he said.

Joshi expressed confidence that the private life insurer’s agency channel would be able to achieve last fiscal’s performance in terms of new business of about ₹1,050 crore despite the gap as of end December.

“Going by the current trend, we should able to manage it and I am quite positive about it. Confidence I have got from December 2020 is impressive. Our March 2020 business was impacted due to lockdown in the last week. If we get a big March this year, we should be able to cover it,” he said.

Part-time agents

He also said that Bajaj Allianz Life had a lot of part-time agents and it took lot of work to convince them to accept digital, help them reach out to customers to get the forms filled digitally and teach them how can medicals be done digitally.

“For me the big victory was getting people to adapt to this change. This was a critical thing — for them to accept usage of digital technology,” Joshi said.

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Shriram Transport Fin may look at raising $250 mn via social bonds in Q4

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After raising USD 500 million through social bond issue earlier this month, non-banking financial company Shriram Transport Finance Company may look at raising another USD 250 million from such bonds before March, a top company official said.

As part of its USD 3 billion global medium-term note programme, the deposit-taking NBFC had raised USD 500 million at a coupon rate of 4.4 per cent.

As per the Reserve Bank of India (RBI) guidelines, eligible borrowers can raise external commercial borrowing (ECB) up to USD 750 million per financial year under the automatic route.

 

“It depends on international markets (conditions). We need to look for a very good window (to raise USD 250 million from social bonds). If there is a window available, we may raise it before March (2021),” the company’s managing director and CEO Umesh Revankar said. In the quarter ended December 31, the company’s deposits grew by around 19 per cent (y-o-y) to ₹14,335.36 crore from ₹12,027.72 crore last year. On a sequential basis, the increase was close to 11 per cent.

Revankar said the company was earlier using corporate channels to mobilise deposits but has now started accepting deposits across all its branches, resulting in good inflows.

“We feel a similar momentum to continue because right now deposit rates of banks are lower and so depositors are looking for better avenues. Also, inflows into mutual funds have reduced, and it is getting shifted to banks and a good part of it to non-banks. There is a big shift in our resource raising,” he said.

The NBFC offers an average interest rate of around 8 per cent on deposits.

Revankar said the company expects to mobilise deposits of around ₹2,000 crore in the current quarter.

In the third quarter of the current financial year, the company’s profit after tax dipped 17 per cent to ₹727.72 crore as against ₹879.16 crore in the same period of the previous year.

Revankar attributed the drop in profit to lower net interest margins (NIM) and higher provisions of around ₹220 crore related to Covid.

NIM stood at 6.88 per cent compared to 7.34 per cent.

As of December 31, 2020, additional expected credit loss (ECL) provision on loans assets on account of Covid-19 stood at ₹2,507.26 crore.

During the quarter, gross NPA improved to 5.33 per cent from 8.71 per cent. Net NPA eased to 3.22 per cent from 6.09 per cent.

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Four officers’ unions in banking sector caution government about privatisation

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The four officers’ unions in the banking sector have cautioned the government that any step towards privatisation, dilution of government equity and/or further mergers and amalgamations of Public Sector Banks (PSBs) would face stiff resistance.

The resistance would not only be from the four unions but also from all the major stakeholders, according to a letter written by unions to the Finance Minister.

The four officers’ unions are — the All India Bank Officers’ Confederation (AIBOC), the All India Bank Officers’ Association (AIBOA), the Indian National Bank Officers’ Congress (INBOC) and the National Organization of Bank Officers (NOBO).

The unions said“We consider that any proposal for privatisation of PSBs is retrograde, ill-conceived and thoroughly inimical to the national interest…It is as clear as daylight that the only beneficiaries of PSB privatisation would be those entities who still owe the state-owned banks thousands of crores in corporate debt.

“We urge upon your good office to kindly rescind any such privatisation proposal, if on the anvil, not only for the PSBs but for all the PSUs (public sector undertakings)”

The Union Government should rather initiate policy discussion on the ways and means of reforming and strengthening the PSBs, they added.

Privatisation of 8 PSBs?

The unions noted that even after the wave of mergers in PSBs undertaken by the Government, the number of PSBs stands currently at 12. These PSBs own around 60 per cent of the total banking assets in the country and account for 64 per cent of all bank deposits and 60 per cent of total loans and advances.

They observed that if the proposed privatisation policy is to be implemented, it would amount to privatisation of at least 8 PSBs, which will put an end to the market dominance of the PSBs.

The Unions referred to last year’s government the announcement, identifying “strategic sectors” where the number of PSUs would be brought down between one and four. Banking along with insurance, steel, fertiliser, petroleum, coal and minerals etc. figure in the list of 18 strategic sectors.

The unions underscored that the dominance of PSBs insulated the Indian economy from the worst consequences of the 2008-09 financial crisis. Further, crucial schemes of financial inclusion like the Jan Dhan Yojana and MUDRA have been implemented by the PSBs much more rigorously than the other segments of the banking industry.

The unions stated that despite the sordid saga of humongous bad-debt accumulation in the recent past, owing to big-ticket corporate debt-defaults, massive haircuts through the debt-recovery channel under the IBC (Insolvency & Bankruptcy Code) and burgeoning NPA (non-performing asset) write-offs, the PSBs have registered positive operating profits year after year, which stand testimony to the hard work and efficiency of the officers and employees of the PSBs.

“In this backdrop and at a time when the national economy is still reeling under the impact of a severe recession caused by the Covid-19 pandemic, we cannot fathom why the Union Government is keen on privatisation of PSUs in general and the PSBs in particular,” according to the letter.

The unions said it was the PSBs, Regional Rural banks and old generation private banks have successfully implemented all the schemes of the government to provide the much-needed fiscal stimulus during Covid times.

They stressed that the development of infrastructure can only be attributed to the contribution of PSBs in the absence of any major DFIs (Development Financial Institutions.

“While private sector banks like the Yes Bank, and earlier the Global Trust Bank, NBFCs like IL&FS and DHFL, co-operative banks like Punjab and Maharashtra Cooperative Bank (PMC) etc. have witnessed failures in the recent times, the PSBs have continued to ensure financial stability and security for the depositors.

“Experience tells us that strengthening the PSBs is the way forward for building an efficient, robust and stable financial sector in India,” the Unions said.

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Muthoot Capital Services reports decline in net profit in Q3

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The net profit of Muthoot Capital Services Ltd reduced to Rs 14 crore in Q3 of FY21 compared to Rs 19 crore in the same quarter last year.

The total income for the quarter touched Rs 120.7 crore. With things slowly starting to return back to normal, the company while continuing to adopt a conservative approach, disbursed two-wheeler loans amounting to Rs 304 crore only and had a total disbursement of Rs 326 crore during the quarter. The total AUM reached Rs 2,224 crore at the end of the quarter, including the assigned portfolio of Rs 25 crore.

For the same quarter last year, the company had a total disbursement of Rs 465.8 crore and AUM at the end of same quarter last year was at Rs 2,751 crore. During the same quarter last year, the company reported total revenue of Rs 150.9 crore.

Thomas George Muthoot, Managing Director, Muthoot Capital Services Ltd, said, “While we are seeing improvement on the ground and return of customers back to the dealer points, the challenging period still continues. The business is expected to do well going forward, various requirements such as social distancing, need for your own personal vehicle etc, as well as the trends seen during the current festive season, could mean that it would take a few more months before we go back to the pre-covid levels.”

“The GDP has already contracted, impacting the common man and his livelihood. This will increase our collection efforts and make us be circumspect during disbursement. Our liquidity position is strong, and our cost of funds is seeing a downward trend. With assistance offered by the Government / RBI, a loyal team of staff and a loyal customer base, the post Covid growth will be phenomenal,” he said.

Madhu Alexiouse, Chief Operating Officer, said, “After seeing good volumes in October and November, December was a lacklustre month in comparison. We expect volumes to pick-up in January and move to pre-covid levels by March.

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IDFC First Bank reports Q3 net profit of Rs 129.61 crore

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IDFC First Bank reported a standalone net profit of Rs 129.61 crore in the third quarter of the fiscal, as against a net loss of Rs 1,638.89 crore a year ago.

For the quarter ended December 31, net interest income grew by 14 per cent to Rs 1,744 crore, up from Rs 1,534 crore in the third quarter last fiscal.

“The NII for the quarter takes into account provision for interest reversal on proforma NPA cases at December 31, 2020,” IDFC First Bank said in a statement on Saturday.

Net interest margin rose to 4.65 per cent in the third quarter this fiscal versus 3.86 per cent a year ago and 4.57 per cent in the second quarter this fiscal.

Provisions however, shot up to Rs 482.22 crore in the October to December quarter from Rs 230.47 crore a year ago.

The gross non performing assets of the bank reduced to 1.33 per cent as of December 31, as compared to 2.83 per cent a year ago. The net NPA was 0.33 per cent as of December 31, as compared to 1.23 per cent as of December 2019.

The pro forma gross NPA as on December 31, 2020 was 4.18 per cent and the net NPA as on December 31, 2020 was 2.04 per cent.

The total restructured (approved and implemented) book including retail and wholesale loans stood at 0.80 per cent of the total funded assets.

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ICICI Bank’s Q3 net profit increases 17 pc to Rs 5,498 cr, BFSI News, ET BFSI

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ICICI Bank on Saturday reported a 17.73 per cent jump in its December quarter consolidated net profit at Rs 5,498.15 crore, as against Rs 4,670.10 crore in the year-ago period. On a standalone basis, the country’s second largest private sector lender by assets showed a 19.12 per cent rise in the post-tax profit at Rs 4,939.59 crore for the reporting quarter, up from Rs 4.146.46 crore in the October-December 2019 period.

Its total income increased to Rs 24,416 crore from the year-ago’s Rs 23,638 crore, while the total expenditure was lower at Rs 15,596 crore as against Rs 16,089 crore.

The reported gross non-performing assets ratio was at 4.38 per cent, but would have been 5.42 per cent if not for the Supreme Court order asking banks not to classify non-paying loan accounts as NPAs after the end of the loan repayment moratorium.

Its overall provisions increased to Rs 2,741 crore from the year-ago period’s Rs 2,083 crore, but lower when compared to the preceding quarter’s Rs 2,995 crore, as per its exchange filing.

It made a contingency provision of Rs 3,012.16 crore for borrower accounts not classified as NPAs pursuant to the interim order of the Supreme Court and utilised Rs 1,800 crore of the Rs 8,772.30 crore in provisions for the pandemic made earlier.

As at December 31, 2020, the bank held an aggregate COVID-19 related provision of Rs 9,984.46 crore, including contingency provision amounting to Rs 3,509.46 crore, it said.

It said the provisions held by it are more than what is required by the RBI and the bank’s capital and liquidity position are strong.

Its overall capital adequacy stood at 18.04 per cent as of December 31, 2020.



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Rama Mohan Rao Amara takes charge as the MD & CEO of SBI Card, BFSI News, ET BFSI

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SBI Card has appointed Rama Mohan Rao Amara as Managing Director and Chief Executive Officer.

Rao takes over from Ashwini Kumar Tewari who has been appointed as MD at State Bank of India.

SBI Card in a statement said, “Rama Mohan Rao Amara is a veteran banker, with a successful career spanning over 29 years at the State Bank of India. Prior to taking charge at SBI Card, Mr. Rao was the Chief General Manager, SBI Bhopal Circle, where he managed two key states MP & Chhattisgarh.”

Ashwini Kumar Tewari, MD at State Bank of India said, “We are pleased to welcome Mr. Rama Mohan Rao Amara as the MD & CEO of SBI Card. He has exhibited reliable and proficient leadership, while managing key assignments across India and abroad. His vision and strategic approach would be a key enabler to lead the rapidly growing credit card business. We are confident that he will be able to further strengthen SBI Card’s position and thereby increase value for all stakeholders.”

On his appointment, Rama Mohan Rao Amara, MD & CEO, SBI Card said, “It is an exciting time to join SBI Card. The Indian economy is slowly but surely coming out of the grip of the pandemic. With a renewed focus towards cashless and digital payments, the country is firmly on the path to becoming a digital economy. Moreover, the Indian credit card market continues to present significant growth potential due to its favourable demographic changes and extremely low credit card penetration rate. SBI Card is known and respected as a customer centric, resilient, and nimble organization. I look forward to leading the organisation to newer heights.”

Rao had started his banking career with SBI in 1991 as a probationary officer and has expertise in field of credit, risk, and international banking. He has held two foreign posting in Singapore and later in US as CEO of Chicago branch and then as President and CEO of SBI California and has also served as CGM – Financial Control at SBI’s Corporate Centre in Mumbai.



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Rama Mohan Rao Amara appointed MD and CEO of SBI Card

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SBI Card, the country’s largest pure play credit card issuer, has a new Managing Director and CEO in Rama Mohan Rao Amara. He has been part of State Bank of India Group for almost three decades now and has handled several key assignments both in India and abroad.

Amara has come in the place of Ashwini Kumar Tewari, who was recently appointed as Managing Director of SBI. SBI Card board approved Amara’s appointment for two years at a meeting on Saturday.

Prior to this appointment, Amara, who started his banking career with SBI in 1991 as a probationary officer, was the Chief General Manager of SBI Bhopal circle. He had earlier served as the Chief General Manager, Financial Control at SBI Corporate Centre in Mumbai.

Commenting on the appointment, Ashwini Kumar Tewari, Managing Director, SBI, expressed confidence that Amara’s vision and strategic approach would be a key enabler to lead the rapidly growing credit card business. “We are confident that he will be able to further strengthen the SBI Card’s position and, thereby, increase value for all stakeholders”.

Amara, who holds a bachelor’s degree in engineering, said that it is an exciting time to join SBI Card as the Indian economy is slowly but surely coming out of the grip of the pandemic. With a renewed focus towards cashless and digital payments, the country is firmly on the path to becoming a digital economy, he said.

Moreover, the Indian credit card market continues to present significant growth potential due to its favourable demographic changes and extremely low credit card penetration rate, he added.

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