Tag: Axis Securities

HDFC Bank | IndusInd | DCB: RBI allowing promoters to have 26% stake to benefit HDFC Bank, IndusInd & DCB: Siji Philip, BFSI News, ET BFSI

Banking & Finance

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“RBI has remained silent on the NBFCs getting converted into banks and also large corporates getting more into the banking game. We feel that the RBI is taking a more calibrated approach and looking at how NBFCs are getting attuned to larger scale regulations which were announced earlier,” says Siji Philip, Senior Research Analyst, Axis Securities.

The RBI’s new circular on bank ownership has come out allowing 26% stake to promoters. Already reports are coming in of the Hindujas looking at increasing their stake in IndusInd and a $1.1 billion financial chest for that sense being readied; HDFC Limited now has headroom when it comes to HDFC Bank. Bandhan Bank there could see action as well. Your view?.
Whatever steps were announced on Friday in terms of the promoter shareholding definitely is a positive because there was uncertainty and some expectations were building up. Raising the promoter stake from 15% to 26% would definitely be a positive, more specifically for banks like IndusInd where the promoters have earlier shared their intention of increasing their stake. In the case of HDFC Bank, HDFC Limited can increase its stake, Aga Khan promoters can raise their stake in DCB. So for these kinds of banks, it is definitely a positive step.

There are certain guidelines which have been announced and the recommendations are on track on gradual calibration with the entire financial industry. RBI has remained silent on the NBFCs getting converted into banks and also large corporates getting more into the banking game. We feel that the RBI is taking a more calibrated approach and looking at how NBFCs are getting attuned to larger scale regulations which were announced earlier.

RBI clearly is still reluctant on issuing bank licenses to large corporates. To add to that, payment banks are also allowed to convert into SFBs but only after a gap of almost five years. With large numbers of fintechs and SFBs now, is there a need to issue more licenses?
We feel that RBI has always been about granting banking licenses and if the payment banks get listed, definitely a watch period is required to see how things pan out, how the entire financial system gets attuned to the various new entities which are coming in with the likes of fintechs.

Just a three-year proposal, which was given in the earlier recommendation, would be considered a slightly shorter duration compared to a five-year duration where one can see the gradual working and how it plays out in the financial system. That would be one of the key reasons why the five-year period has been kept rather than switching to a three-year period.



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Credit card issuances, spends see sharp uptick as festive season nears, BFSI News, ET BFSI

Banking & Finance

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Credit card firms are witnessing a sharp rebound in new card issuances and spends as lockdowns and restrictions ease across geographies.

On a year to date basis, the credit card industry witnessed a sharp improvement in spends, albeit on a marginally lower base in July. New card sourcing picked up momentum, supporting Cards-in-Force (CIF) growth of 10% YoY. In July 2021, the business volumes grew by 38% year on year, which was aided by the increasing shift towards online spending. Spends grew a robust 78% YoY. The new customer additions have shown an improvement in MoM and are expected to improve further thus aiding CIF growth.

ICICI Bank

Amongst the private banks, ICICI Bank continued to remain a clear outperformer registering a growth of 23%/145% YoY in CIF/Spends on a YTD basis. This resulted in the market share improvement of 190/503bps YoY in CIF/Spends to 17.7%/18.4% respectively. New card additions were the highest for ICICI at 655,000 during this fiscal

SBI Cards

SBI Cards picked up momentum with new card additions of 198,000 being the highest in the past 16 months, resulting in a CIF growth of 14% YoY. During YTDFY22, spends grew by 68% YoY, supported by a lower base a year ago. July 21 business volumes are encouraging and with the COVID 2.0 impact waning, the growth momentum is likely to sustain. Business volumes remained strong growing at 40% YoY in July 2021 and 46% on a YTD basis.

HDFC Bank

While HDFC Bank remains the market leader with a 20%+ market share in CIF/spends each, it continued to underperform as the credit card vertical was impacted due to the RBI’s restrictions on new card sourcing. However, with the RBI permitting the issuance of new cards, the company is expected to improve its performance. On a YTD basis, the performance remained muted with CIF remaining flat YoY and spends registering a growth of 60%, favoured by a lower base. The bank’s customer base came down by 222,000 customers in YTDFY22.

AU Small Finance Bank

AU Small Finance Bank, a new entrant in the credit card space since November 2020 has witnessed a strong pick-up (albeit the low base) since the commencement of the business. While the bank holds a negligible market share in terms of CIF/Spends which currently stand at 0.04/0.02% respectively on a YTDFY22 basis, increasing traction in the credit cards vertical would aid revenue streams for the bank.

The outlook

“The relaxations in the Covid related lockdowns and a gradual pick-up in the economic activities have aided a strong revival in spends, new sourcing, and business volumes in July 21. The forthcoming festive season will lend further support to the picked-up momentum in the spends and new customers sourcing. However, a possible Covid 3.0 remains a key risk. We continue to believe that Citi Bank’s exit from the credit cards business along with the domestic corporate loan recovery cycle yet to pick up, provides good growth opportunities for the credit cards business, supported by improving macro-conditions,’ Axis Securities said in a note.



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Jana Small Finance Bank and Axis Securities partner to provide investment services, BFSI News, ET BFSI

Banking & Finance

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Jana Small Finance Bank announced its partnership with Axis Securities, a subsidiary of Axis Bank, to provide customers with a 3-in-1 account that combines banking and investing. The 3-in-1 account integrates Savings Bank Account maintained by Jana Small Finance Bank and Demat and Trading Accounts maintained by Axis Securities.

The 3-in-1 account will make it easier for customers to move funds, eliminate paperwork, and provide a single, streamlined forum to invest in Axis Securities’ various investment instruments, such as mutual funds, SIPs, equities, and other investment avenues. The customers can opt for various services of Axis Securities like Mutual fund investing, Stock broking, Investment advisory and Portfolio management services, along with the opening of Trading / Demat account.

Ajay Kanwal, MD and CEO, Jana Small Finance Bank, on the new association, said, “We are pleased to offer our customers access to a scalable 3 in 1 platform. This collaboration with Axis Securities will help us continue to create positive relationships with our customers by giving them access to smart financial planning resources that will assist them in their wealth-creation journey. Mutual funds SIP, where customers can invest a pre-determined sum every month in an MF scheme of their choice, would be the main attraction for Jana customers.”

B. Gopkumar, MD & CEO of Axis Securities, said, “We are pleased to work with Jana Small Finance Bank and to expand our investment solutions to their customers. Customers of Jana Small Finance Bank will have seamless and easy access to our technology-driven, diverse range of products and insightful research. This collaboration is another step in our mission to help investors take control of their finances by making well-informed investment decisions.”



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Product review: Axis Securities’ YIELD platform

Personal Finance

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To make investing in bonds and debentures easier, Axis Securities launched a new online platform ‘YIELD’ early this month. Customers of Axis Securities can use YIELD to buy and sell bonds in the secondary market.

What it is

YIELD enables customers of Axis Securities to invest in a range of corporate bonds (rated A and above) trading in the secondary market. The bonds purchased on the platform can also be sold here.

Today, when you buy / sell bonds through your trading account with a broker, the transaction goes through based on the volumes available on the stock exchanges. Axis Securities has empanelled large wealth management firms (that deal in bonds) on its platform. It is the inventory of bonds available for sale with these firms that is aggregated and displayed on the YIELD platform.

For each bond, YIELD shows you the face value, current price (‘minimum investment’), coupon rate, yield to maturity (‘yield’), maturity date, frequency of interest payment, among other details. You can also see whether the bond is tax-free or taxable and perpetual or not. The platform also shows you the stream of cash flows from a bond over its entire tenure. The periodic interest payments each year and the final maturity amount to be received in the end, are shown diagrammatically for each bond. YIELD also allows you to compare different bonds with each other as also with fixed deposits from a few select banks including SBI.

Suitability

While YIELD offers the prospect of better liquidity (larger volumes) that HNI bond investors may require, it may not offer any significant advantage to small retail investors who can, therefore, continue to trade with their existing brokers. YIELD gives Axis Securities’ customers access to bonds available with large wealth management firms (which is besides what is available on the exchanges) thereby providing them greater liquidity.

The platform also offers the advantage of one-time KYC (know your customer) to investors. According to Vamsi Krishna, Head- Products & Marketing, Axis Securities, once your KYC with Axis Securities is complete, all your purchases through YIELD are simply conducted based on that. You don’t require a separate KYC for bond transactions with every bond house. Existing customers of Axis Securities can use the platform at no additional cost. Note that, though, as on date, you can use YIELD to sell only those bonds that have been bought on the platform.

Furthermore, today, with the cheapest bond on the platform priced at around ₹2 lakh and many others at ₹10 lakh, per bond, the platform is not suited to the needs of small investors. Axis Securities plans to introduce bonds of smaller denominations in future. Retail investors can invest in tax-free and taxable bonds of significantly small denominations via their trading accounts with other brokerages as also with Axis Securities (outside of the YIELD platform).

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CCI nod for Axis Bank stake buy in Max Life Insurance

Banking & Finance

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Competition Commission of India (CCI) has approved the stake acquisition in Max Life Insurance Company by Axis Bank, Axis Capital and Axis Securities.

Axis Bank had sought CCI nod to acquire upto 20 per cent stake in Max Life in a deal also involving stake sale to the bank’s subsidiaries Axis Capital and Axis Securities.

It maybe recalled that Axis Bank had to revise its agreement on stake buy in Max Life Insurance as the Reserve Bank of India had rejected this bank’s earlier proposal to directly buy 17 per cent in Max Life Insurance.

As per the combination notice filed with CCI , the shareholding of Axis Bank in Max Life will increase from about 1 per cent to approximately 9.9 per cent.

Also read: Insurance awareness, ownership show progress in Covid times: Max Life’s Survey

Also, Axis Capital and Axis Securities will acquire 2 per cent and 1 per cent, respectively, shareholding in Max Life. Axis entities will also have a right to acquire an additional stake of up to 7 per cent in Max Life, in one or more tranches, taking their overall stake to 19.99 per cent.

“Commission approves acquisition of the stake in Max Life Insurance Company by Axis Bank, Axis Capital and Axis Securities,” the competition watchdog said in a tweet.

In December last year, Max Financial Services Limited (MFSL), the parent company of Max Life Insurance, completed a swap of Mitsui Sumitomo Insurance Company’s (MSI) 20.57 per cent stake in Max Life Insurance with 21.87 per cent stake in MFSL.

Post this swap, MFSL’s stake in Max Life effectively increased to 93.10 per cent from 72.5 per cent held earlier.

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HDFC Bank signals IT issues may not be fixed by March, BFSI News, ET BFSI

Banking & Finance

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HDFC Bank has indicated in its conference call with analysts that the lender might not complete fixing its back-end IT issues during the current fiscal. The bank said that its action plan relating to disaster recovery would take 12-18 months, while its immediate plans would take 10-12 weeks.

The country’s largest private bank had reported its Q3 results on Saturday — the first after the RBI pulled up the lender for repeated problems faced by customers in accessing digital banking.

The bank had reported an 18% year-on-year growth in earnings. The bank’s share price rose by over 1% after the results on a day the sensex fell by nearly 1% after its record profit of Rs 8,758 crore.

According to Macquarie research analyst Suresh Ganapathy, the tech resolution will take time and could spill over to end of June 2021.

“They want to be very sure everything is in place, ramp up capacity and then call the RBI for due diligence … As of now, inability to give credit cards has not affected account openings … But if this continues beyond June, we can see some impact coming in the near term… Meanwhile, for others like ICICI and Axis, this is an opportunity to ramp up their credit card base,” said Ganapathy.

The RBI has barred the bank from launching digital initiatives and issuing credit cards until it fixes issues with its IT system and ensures that multiple outages of online services that happened in the past do not repeat.

According to analysts, though it would take time to fix the issues, the bank was optimistic of getting permission from the RBI for a digital lending platform for auto loans.

According to Siji Philip of Axis Securities, the bank has made a representation to the regulator for digital lending for four-wheelers and two-wheeler loans.

“On the restrictions imposed by the RBI on December 2, the bank has made progress according to the plan provided to the regulator. The bank expects to complete the process in 10–12 weeks, which will then be subject to RBI inspection,” a note by Edelweiss said. It added that the bank aims to introduce a digital platform for auto loans in 90 days.

ICICI Securities said that the bank’s credit card portfolio was up 9% quarter-on-quarter despite the ban on acquiring new customers coming into effect from mid-December.



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