Tag: banking

HDFC Bank looks to grow investment banking business

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Private sector lender HDFC Bank is looking to grow its investment banking business and possibly double it over the next two years.

“We are investing in the business. Organically, we are growing and inorganically also we are happy to look at options of partnership and ways to grow this business,” said Rakesh Singh, Group Head – Investment Banking, Private Banking, Marketing and Products, HDFC Bank.

The focus will be more on the equity side as the bank has been doing well on the debt side. In an interaction with BusinessLine, Singh said the lender is hiring people and strengthening its teams in divisions including equity research and sales investment banking.

Also read: HDFC Bank creates Digital and Enterprise factories to roll-out new digital products

“The business will grow a couple of times. We hope it will double in two years,” he said. Singh said the bank will also be keen on working on government PSU disinvestment issues.

When asked about corporate credit demand, Singh said that there are signs of revival in the infrastructure sector. “We are seeing some levels of usual growth linked to newer infra in the market. Roads and highways, transmission, warehousing, renewable energy, solar, city gas distribution, oil and gas, ports are witnessing demand for credit,” he said.

Equity markets

Meanwhile, when asked about the bullishness of the equity markets, he said that it is reflecting the potential of the country in the medium term. “I don’t think stock markets are running far ahead of fundamentals,” Singh said, adding that there is enough economic momentum for the country to come out of the Covid-induced economic slowdown. This could however, take a slightly longer period of time of two to three years, he added.

“Macro numbers are just an aberration because of the Covid-19 pandemic. The underlying goods and services tax collections are very strong and show the robustness of the economy. A one time event driven fiscal pressure does not reflect poor economic fundamentals of the country,” he said.

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Amid economic uncertainty, many banks eye capital raising plans

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With expectations of further economic uncertainty as the second wave of the Covid-19 pandemic continues and expectations of a third wave, banks are looking to raise funds to improve their capital buffers and fund expansion plans.

Private sector lender Federal Bank said its board will meet on June 16 to consider proposals for issuance of equity shares by way of a preferential allotment and raising of equity capital of the bank either through Rights Issue, Private Placement, Preferential Issue, Further Public Offer, Qualified Institutional Placement, Global Depository Receipts, American Depository Receipts annd Foreign Currency Convertible Bonds.

Also read: Public sector banks support for Covid-19 health infra gathers pace

The board will also consider a proposal for borrowing or raising of funds in Indian Currency or any other permitted foreign currency by way of issue debt instruments including but not limited to Additional Tier-I bonds, Tier-II bonds, Long Term Bonds (Infrastructure and Affordable Housing), Masala Bonds, Green bonds, Non-convertible Debentures or such other debt securities as may be permitted by RBI from time to time, in domestic market and/or overseas market, on a private placement basis, it said in a regulatory filing.

More plans ahead

In recent weeks, other lenders too have announced plans to raise funds and expectations are that more will be finalising plans soon. Private sector lender Yes Bank had on June 10 said it has received approval from its board of directors to raise ₹10,000 crore through debt securities.

Similarly, public sector Canara Bank has also announced board approval for its capital raising plan for 2021-22, amounting up to ₹9,000 crore by way of equity and debt instruments.

Bank of Maharashtra is also looking to raise up to ₹2,000 crore through the qualified institutional placement route before end of July. Reserve Bank of India governor Shaktikanta Das had on June 4 also urged banks and NBFCs to build capital buffers and ensure adequate provisioning to face challenges emanating from the second wave.

“Building adequate provisioning and capital buffers, together with sound corporate governance in financial entities, have become much more important than ever before, more so in the context of banks and NBFCs being at the forefront of our efforts to mitigate the economic impact of Covid-19,” he had said on June 4.

Public and private sector lenders had also raised funds in 2020-21 amidst the Covid-19 led economic uncertainty.

“Banks and need to augment their capital because there could be stress arising out of the second wave,” Das had told reporters post the monetary policy announcement. Their overall capital position is at a very stable level currently, he had further said.

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YES Bank receives board approval to raise ₹10,000 crore through debt securities

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Private sector lender Yes Bank has received approval from its board of directors to raise ₹10,000 crore through debt securities.

“The board of directors of the bank, in its meeting held on June 10, 2021, have considered and approved seeking shareholders’ approval for borrowing or raising funds in Indian or foreign currency up to an amount of ₹10,000 crore by issue of debt securities including but not limited to non-convertible debentures, bonds, Medium Term Note (MTN),” it said in a regulatory filing on Thursday.

The bank’s capital adequacy ratio was 17.5 per cent as on March 31, 2021, while its CET1 ratio was 17.5 per cent.

Prashant Kumar, Managing Director and CEO, Yes Bank had told BusinessLine that the lender may consider fund raising if there is a lot of improvement in the economy, and credit growth takes place.

“All approvals are in place. Depending on the situation, we will take a call. We had taken an overarching approval of ₹10,000 crore but the requirement will not be so much,” he had said after the fourth quarter results of the bank.

Shifting its registered office

Meanwhile, the board also approved a proposal to move the bank’s registered office to Santacruz (East), Mumbai from ONE International Centre, Elphinstone (W), Mumbai. “This is with effect from June 14,” it said in a separate filing.

Significantly, its new office is the old headquarters of Reliance Anil Dhirubhai Ambani Group. The erstwhile Reliance Centre is spread over a 21,432.28 square metre plot.

Reliance Infrastructure Limited had sold off the property to Yes Bank for ₹1,200 crore in April this year. “Entire proceeds from sale of Reliance Centre, Santacruz is utilised only to repay the debt of YES Bank,” Reliance Infra had said in a statement.

Last year, Yes Bank had said that it was taking possession of the properties under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, and comes for non-payment of loans amounting to ₹2,892 crore.

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City Union Bank hopes to maintain better asset quality in FY22 amid second wave blues

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Leading old private sector lender City Union Bank hopes that FY22 will not be as bad as FY21 and credit growth this fiscal for the bank could be in the mid- to high-single digit if the economic environment and Covid second wave behaved like last year.

“Though the impact of the second wave is much higher in terms of infection and mortality, its impact on bank’s growth and other parameters may not be as bad as it saw in the first wave. I do not say that we will be seeing milk and honey flowing, but it looks like now things are not as bad as the same time last year,” N Kamakodi, Managing Director & CEO, told the Q4FY21 earnings conference call.

The bank’s credit growth in first wave hit-FY21 was 7 per cent and the slippage ratio to closing advances was at 3.01%.

He said the adverse impact of the second wave on the growth and slippages would definitely be there, but it may not be as bad as the first wave. FY21 almost ended like what we thought during the beginning of the year, and we hope FY22 will not be as bad FY21. It should be slightly better, he added.

At the same time, the total lockdown in three States particularly in Tamil Nadu where CUB has the bulk of its operations, the collection efforts are dampened and some impact on the collections are there. There are no property sale transactions as government registration departments are closed. Hence, the bank expects to see some spike, but overall slippages will be slightly better than FY21.

“We expect even though for the year as a whole the slippage may be slightly lower than whatever we saw in FY21, the slippages could be front loaded may be in the first one or two quarters and we will be seeing things getting eased up once the lockdown is removed,” Kamakodi said.

The bank expects its gross and net NPA to be lower than FY21 amid some quarterly spikes.

ECLGS scheme

In FY21, the major credit growth came from jewel loan and extension of facility to ECLGS scheme. Of the ECLGS scheme under ECLGS 1, 2, and 3, it disbursed ₹2,096 crore for an exposure of about ₹10,445 crore constituting about 5.63 per cent of the advances.

“We expect a further sanction of about ₹200 crore from ECLGS 3.0 scheme. The government guaranteed ECLGS scheme 1, 2 and 3, in fact most of the credit of MSMEs and also non-MSME sector and businesses have started generating surplus. This has also resulted in improving capital adequacy ratio as the disbursement to the ECLGS scheme attracts no risk weight and is guaranteed by the government,” said Kamakodi.

The total restructured portfolio for MSME account on March 31, 2021 stood at ₹1,849 crore and overall percentage restructured account constituted about 4.99 per cent.

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HDFC Bank to turn carbon neutral by 2031-32

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Private sector lender HDFC Bank plans to turn carbon neutral by 2031-32 and will reduce its emissions, energy, and water consumption. “The bank will continue to incorporate and scale up the use of renewable energy in its operations,” it said in a statement on Thursday.

As part of its ESG strategy, it will also focus on offering loans for green products like electric vehicles at lower interest rates and incorporating ESG scores in its credit decisions. Additionally, it is working on a framework for issuing green bonds.

When asked about the plan to offer loans at lower interest rates for electric vehicles, Ashima Bhat, Group Head – CSR, Business Finance and Strategy, Administration and Infrastructure, HDFC Bank said the proposal is being evaluated.

Also read: A sizzling rally lures HDFC Bank to do more equity deals

“We have to see the introduction of electric vehicles in the market. Products are in the works, but there has to be a demand as well,” she said, adding that there is expectation that they will be introduced in a large way but it may be done in two to three years’ time.

As a part of its strategy to turn carbon neutral, HDFC Bank is also looking at other initiatives such as decreasing absolute emissions and energy consumed in line with current level of 3,15,583 MT CO2 emissions and increase rooftop solar capacity in large offices. It also plans to convert 50 per cent of its total sourced electricity to renewable energy, create single use plastic free corporate offices, plant 25 lakh trees and reduce water consumption by 30 per cent.

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KVGB conducts vaccination camp for bankers

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A Covid vaccination camp for bankers was conducted at the head office of Karnataka Vikas Grameen Bank (KVGB) in Dharwad on Wednesday.

Also read: KVG Bank launches loan scheme for medical sector

Inaugurating the camp, P Gopi Krishna, Chairman of KVGB, said the bank employees and officers have done commendable job during the period arising out of Covid by extending uninterrupted service to the customers in general and villagers in particular. “The vaccine would boost their self-confidence and immunity,” he said.

More than 200 bank employees aged between 18 and 45 were vaccinated on Wednesday. The camp was organised in association with the Dharwad district administration and the Dharwad district district health office.

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We are looking at a revival through retail focus, says Shivan JK, MD, Dhanlaxmi Bank

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Thrissur-based Dhanlaxmi Bank has chalked out strategies for growth by expanding its retail book. Shivan JK, Managing Director and CEO, is optimistic of achieving a good growth rate in the current fiscal. He says that the bank would continue to focus on CASA and retail advances including gold loans. The business volumes grew 6.39 per cent to ₹18,834 crore for the last fiscal. Edited excerpts:

What are your growth plans in the current financial year?

We will continue our focus on expanding our retail book through gold loan and other retail products. We have launched limited period MSME campaign. Our gold loan book is showing steady growth and with the launch of special 1/3-month product this book is gaining traction.

Also read: Dhanlaxmi Bank posts ₹5.28 crore net profit in Q4

We are looking at an overall 12-15 percent growth with thrust on retail/ agri including microfinance and select MSME and corporate growth. Our liability franchise is robust, and we estimate steady growth in CASA and retail term deposits.

What is the position of NPAs of the bank? How has it progressed last year?

The GNPA position as on March 31, 2021, was 9.23 per cent. We are maintaining a provision coverage of 74.20 per cent.

The position has deteriorated from the previous year due to a low advance base and recognition of NPAs, which were under moratorium following the Supreme Court order on March 23. If we include the ‘proforma’ NPAs, we were at 10.82 per cent as at the end of Q3.

Most of these are small ticket NPAs with good security coverage. Due to lockdown, our recovery efforts are constrained. We are hopeful of bringing this level below 9 per cent by end of this quarter. And there are no major fresh slippages expected.

What is the impact of Covid on the bank’s business? What plans are in place?

The growth has been muted whereas asset deterioration has steadily increased. The moratorium and its sudden lifting added to the woes.

We have instructed our operating offices to maintain all Covid protocols and safety precautions. We are tying up with two private hospitals to ensure that all staff take at least the first dose of vaccine.

When do you see the economy recovering? Also do you see interest rates going up soon?

Our hope is that things return to almost normal from the second quarter of this fnancial year and then the economy will bounce back with a growth in GDP of 8-9 per cent for the FY as per revised predictions. As for your question regarding the interest rates going up, we have reached the bottom. But with the liquidity overhang and the time lag in corporate demand picking up, the rates would be stable in the short term but will firm up by Q3.

Also read:Banks decide to extend unsecured personal loans for Covid treatment

How about NRI investments in your business? And are there any plans for merger with bigger banks?

We are not a big player in the NRI segment compared to other peer banks. In this current financial year, it will be one of our focus areas. And, no, we don’t have any plans for merger with other bigger banks.

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Investors cheer after RBI clarifies crypto trading isn’t banned

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The Reserve Bank of India’s clarification that cryptocurrency trading isn’t banned in the country is a welcome relief for a community facing push-back from traditional lenders needed to help settle these deals.

The regulator late on Monday told banks not to cite a 2018 central bank circular as a reason to hinder crypto trades, given the Supreme Court has since squashed the order. “Banks must continue with other routine due diligence measures on the deals,” the RBI said.

Also read: A glimmer of hope for cryptos in India

The RBI order follows local media reports that financial firms, including SBI Cards & Payment Services Ltd., one of India’s biggest credit card issuers, and the nation’s largest private-sector bank HDFC Bank Ltd. had cautioned customers against dealing in virtual currencies. Indian authorities have repeatedly expressed concern that crypto assets could be used for criminal activity such as money laundering and funding terrorism.

“Investing in crypto has always been 100 per cent legal in India and the new RBI circular clearly confirms the right to do business with crypto firms,” said Avinash Shekhar, co-Chief Executive Officer at ZebPay, India’s oldest crypto exchange. He added that the clarification will attract more investors to the virtual currencies.

Also read: What’s next in the world of cryptos and blockchain?

“The RBI’s broader concerns and banks’ worries around money laundering should help to spur regulations and make the industry safer and stronger,” said Sumit Gupta, CEO and co-founder of crypto exchange CoinDCX.

Bitcoin, the largest cryptocurrency, was little changed as of 12:15 pm in Hong Kong on Tuesday, after having gained in the two previous sessions.

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A sizzling rally lures HDFC Bank to do more equity deals

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A hot equity market in India is prompting HDFC Bank Ltd. to try to muscle in on the action as companies raise record levels of funding.

The government has flooded the market with money in response to one of the world’s worst outbreaks of coronavirus, pushing stocks to dizzying levels and helping companies to boost capital buffers. Despite being India’s most valuable lender, HDFC Bank so far hasn’t been able to exploit its strong balance sheet to make inroads into this competitive market.

“We will do whatever it takes to reach there – hire more people, grow more people from inside and even enter into partnerships,” Rakesh Singh, group head of investment banking, private banking, marketing and products at HDFC Bank, said in an interview. “As we build our distribution network a larger share of the equity capital market deals will come our way.”

Also read: Indian shares open lower ahead of GDP data

It may be easier said than done for a relatively late starter like HDFC Bank to grab a bigger share of the market as it grapples with uncertainty over its asset quality. The country’s second-largest lender will have to fight it out with veteran local players including ICICI Bank Ltd., Axis Bank Ltd. and State Bank of India.

HDFC Bank has lagged in recent years as it focused on its fast-growing core business of lending and deposits rather than investment banking. The Mumbai-based company ranked number 16 for overall equity deals business last year, and number 29 in 2019, according to data compiled by Bloomberg.

Also read: Markets may open flat as bulls likely to take a breather

“It’s a cut-throat market where big corporates prefer to work with dominant and well-established bankers with existing relationships who can offer them the best pricing,” said Siddharth Purohit, an analyst at SMC Global Securities Ltd. “Unless HDFC Bank offers something really attractive it will not be easy for them to grow this business quickly and get the big-ticket deals.”

India’s stocks have extended their climb, reflecting investor optimism that the economy will rebound strongly from devastation caused by the coronavirus. The benchmark index was up 0.7 per cent on Monday, close to its record high in February.

Companies raised ₹789 billion ($10.9 billion) so far this year through the equity markets, a 9.3 per cent increase from last year, according to data compiled by Bloomberg. That’s after an unprecedented ₹2.2 trillion of deals in 2020.

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Bank credit growth declines to 5.6 per cent in March

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Bank credit growth decelerated to 5.6 per cent in March 2021 from 6.4 per cent a year ago, the Reserve Bank said on Friday.

On the other hand, aggregate deposits growth accelerated to 12.3 per cent in March 2021 from 9.5 per cent in the same month of the previous year.

Lower growth in credit vis-a-vis deposits led to decline in the all-India credit-deposit (C-D) ratio to 71.5 per cent in March 2021 from 76 per cent a year ago.

Bank credit grows 5.33%; deposits rise 10.94%

Combined credit by bank branches in top six centres (Greater Mumbai, Delhi, Bengaluru, Chennai, Hyderabad and Kolkata) declined marginally during 2020-21. These six centres together accounted for over 46 per cent of total bank credit.

“Bank branches in urban, semi-urban and rural areas, on the other hand, recorded 9.4 per cent, 14.3 per cent and 14.5 per cent credit growth, respectively, during the year,” the RBI said while releasing the ‘Quarterly Statistics on Deposits and Credit of SCBs: March 2021’.

Public sector and private sector banks recorded 3.6 per cent and 9.1 per cent credit growth, respectively, whereas lending by foreign banks declined during 2020-21.

Metropolitan branches, which account for over half of total deposits, recorded nearly 15 per cent growth during 2020-21.

The share of current account and savings account (CASA) deposits in total deposits increased to 44.1 per cent in March 2021 from 42.1 per cent a year ago.

“The share of private sector banks in total deposits and credit by SCBs (Scheduled Commercial Banks) increased during 2020-21 at the cost of public sector banks,” it said.

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