Tag: banking

BNP Paribas keen to become ‘go to’ bank for India Inc’s overseas buys

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BNP Paribas,which operates in over 70 countries, sees itself emerging as the “go to” investment bank for Indian corporates looking to expand their global footprint through the mergers & acquisitions (M&A) route, Aymar de Liedekerke Beaufort, Head of Territory, India, has said.

“We do see several Indian corporates emerging as champions (at the global stage). We want to work with the top 100 Indian corporates and believe many of these will have specific acquisitions to do in Europe and this is where they may need a bank like us,” Beaufort told BusinessLine in an interview.

Beaufort, who is also the chief of Corporate and Institutional Banking in India, highlighted that Indian corporates have begun to acquire companies abroad for specific needs such as technology and BNP Paribas with its huge global network and one client approach can add value to those corporates looking for specific growth opportunities.

“It’s always good for a CFO to be able to talk to a banker in Delhi, Mumbai and Chennai and deal with the same bank in Argentina, Korea and Vietnam. We as biggest Euroland investment bank bring network benefits for our clients and for us it is one client approach wherever you go in any part of the world,” he said.

There are good chances where BNP Paribas will know both the buyer ( in India) and seller (in Europe) and this is the trend that is likely to play out in coming days, Beaufort added.

He highlighted that Indian corporates in the IT and pharma sectors are already active on overseas acquisitions in recent days.

“We are positioning ourselves as top leader for banking needs of Indian corporates. We bring an angle that others cannot bring by being the best and biggest market cap in Europe,” he said.

New economy

Beaufort said that BNP Paribas India also wants to move from old economy to new economy and get closer to the champions of the new economy. “That is our vision of next ten years. We want to be closer with those companies that are potentially not part of the top hundred today but will become top hundred in next five years. We need to be agile to look at Indian digital businesses and capture them as they grow”, he said.

Asked if he sees investment bank or corporate banking (BNP Paribas is not into retail banking in India) as growth driver for BNP Paribas India in coming days, he said, “Going forward, I do see both growing, but very difficult to say if both will grow at the same speed. I believe our Investment Banking pie will grow quicker. I do expect more commoditisation of corporate banking as it gets digitised.”

Also, BNP Paribas —just as it wants to be seen as the window to Europe for Indian corporates — is keen that its European corporate clients see it as the window for their journey outside of Europe.

Beaufort, who has been with BNP Paribas for more than 30 years, also oversees as part of his responsibilities the bank’s back-office operations and retail brokerage arm Sharekhan.

Investment destination

He also said that India is even more attractive today as an investment destination than before. This is because other destinations may become more challenging and prospects for India is getting better and better.

“India is in competition with the rest of the world. India has lot to offer by sheer size. Just as corporates focus on client centricity, India should focus on investors to convey that they are welcome and their coming in is seen as positive. Nobody will have wrong perception that India is looking to push their local champions. It’s normal and every country does it, but you have to do it in a fair and transparent way so that foreigners don’t feel they have no space for them,” he said.

Asked if BNP Paribas will look to enter retail banking in India, he replied in the negative. “We don’t expect to be competing on solutions where local banks will be much better than us,” he added.

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‘Reserve managers should look beyond the traditional approaches to maintain and enhance returns’

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Reserve managers can deal with the low yield environment by increasing the duration of their portfolios, investing in new asset classes, new markets and more active management of their gold stocks, as per the recommendations in an article in the Reserve Bank of India’s latest monthly bulletin.

In light of the likely persistence of various structural reasons for low yields, it is imperative that reserve managers look beyond the traditional approaches for the management of reserves to maintain and enhance returns, emphasised RBI officials Ashish Saurabh and Nitin Madan in the article.

The authors observed that the first and foremost way to tackle the low yielding environment to increase return would be to increase duration of the portfolio.

“The countries with adequate reserves have sufficient cushion to take on more duration risk. Increasing duration of the portfolio is the easiest and immediate step that can be taken to enhance return by some basis points,” they said, adding, this should be combined with increasing investments in longer maturities.

Investment in new products/asset classes

The officials suggested investment in new asset classes entailing investing in products beyond the traditional investment avenues. They noted that certain products may be novel in nature as surveys and anecdotal evidence do not suggest usage of these products by the reserve managers.

In this regard, the authors referred to the usage of investment products/ asset classes such as foreign exchange (FX) swaps; Repo transactions; dual currency deposits; equity index funds; and increase credit risk of the portfolio.

Active management of gold

The authors opined that active management of gold can yield a decent return to the Central banks beyond capital gains. Some of the avenues for active management of gold include gold deposits, gold swaps and gold Exchange Traded Funds (ETFs).

Central banks own almost 35,000 tonnes of gold (World Gold Council estimate) which is around 17 per cent of worldwide available above-ground stocks.

Investment in new markets

The RBI officials underscored that there are some countries which are relatively stable financially, are highly rated and offer better yields than some of the G7 countries. While these countries do not have very deep sovereign bond markets, they felt that a reserve manager could invest a small portion of their reserves in these markets and generate that extra yield.

Another way to generate higher return is lowering the credit rating requirement and investing in emerging markets which provide higher yield.

“This, however, entails a higher exposure to currency risk as their currencies can be volatile. To mitigate that, the reserve managers could explore investing in US/Euro denominated debt of these countries,” said Saurabh and Madan.

The various options through which a reserve manager could invest in these markets are direct investment; passive funds; ETFs; Separately Managed funds/Customised funds/ETFs; and Total Return Swaps.

The authors observed that the choice of investment strategy, however, would require to be tailored to suit the risk appetite, investment priorities, skill sets and operational capabilities of individual institutions.

The Reserve Bank of India Act, 1934 provides the overarching legal framework for deployment of reserves in different foreign currency assets and gold within the broad parameters of currencies, instruments, issuers and counterparties.

Currently, the law broadly permits deployment of reserves in investment categories such as deposits with other Central banks and the BIS; deposits with commercial banks overseas; debt instruments representing sovereign/sovereign-guaranteed liability with residual maturity for the debt papers not exceeding 10 years; other instruments / institutions as approved by the Central Board of RBI; and dealing in certain types of derivatives.

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Banking system set for positive times ahead

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Things seem to be looking up for banks, going by the assessment of credit rating agencies (CRAs) Moody’s Investors Service and Crisil Ratings.

Moody’s has revised the outlook for the Indian banking system to “stable” from “negative” on the back of stabilising asset quality and improved capital drive.

Crisil Ratings said the rise in bank NPAs will be muted (at 8-9 per cent in FY22 against 7.5 per cent in FY21) due to various Covid-19 pandemic-related dispensations such as the restructuring dispensation, and the Emergency Credit Line Guarantee Scheme (ECLGS).

This is well below the peak of 11.2 per cent seen at the end of fiscal 2018.

In its banking system outlook for India, Moody’s observed that the deterioration of asset quality since the onset of the coronavirus pandemic has been moderate, and an improving operating environment will support asset quality.

Moody’s view

The global credit rating agency opined that declining credit costs as a result of improving asset quality will lead to improvements in profitability. It assessed that capital will remain above pre-pandemic levels.

Moody’s expects India’s economy to continue to recover in the next 12-18 months, with GDP growing 9.3 per cent in the fiscal year-ending March 2022 and 7.9 per cent in the following year.

The agency noted that the pick-up in economic activity will drive credit growth, which it expects to be 10-13 per cent annually.

Weak corporate financials and funding constraints at finance companies have been key negative factors for banks but these risks have receded.

According to Moody’s, the deterioration of asset quality since the onset of the pandemic has been more moderate than it expected despite relatively limited regulatory support for borrowers.

The agency said the quality of corporate loans has improved, indicating that banks have recognised and provisioned for all legacy problem loans in this segment.

“The quality of retail loans has deteriorated, but to a limited degree because large-scale job losses have not occurred. We expect asset quality will further improve, leading to decline in credit costs, as economic activity normalises,” Moody’s said.

Crisil outlook

Crisil Ratings said Covid-19 related relief measures will help limit the rise in NPAs.

While loans in the retail and MSME segments are expected to be the most impacted, corporate loans are seen to be far more resilient. The agriculture segment is expected to remain relatively stable.

With about 2 per cent of bank credit expected under restructuring by the end of this fiscal, Crisil assessed that stressed assets comprising gross NPAs and loan book under restructuring should touch 10-11 per cent (against March-end 2021 estimate of about 9 per cent).

Krishnan Sitaraman, Senior Director and Deputy Chief Ratings Officer, Crisil Ratings, said: “The retail and MSME segments, which together form about 40 per cent of bank credit, are expected to see higher accretion of NPAs and stressed assets this time around.

“Stressed assets in these segments are seen rising to 4-5 per cent (from 3 per cent last fiscal) and 17-18 per cent (14 per cent), respectively, by this fiscal end. The numbers would have trended even higher but for write-offs, primarily in the unsecured segment.”

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Banks hire for $93 billion India, Southeast Asia tech deal hunt, BFSI News, ET BFSI

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Investment banks are boosting their technology hiring in Southeast Asia and India as the region’s fast-growing consumer internet markets catch up with their peers, pushing deals to new heights.

Global lenders Barclays Plc and Citigroup Inc. have created new senior roles, while regional and boutique players are staffing up to capture a surge of activity in mergers and acquisitions and initial public offerings.

“Every single investment bank is looking to hire technology, media and telecommunications bankers,” said Anand Menon, managing director of Executive Principles, a head-hunting firm in India. “TMT is an animal producing multiple babies. We need new-age bankers who think like entrepreneurs to cover them with the same speed as these startups.”

Technology-focused investment bankers in Asia previously focused on larger and more developed markets such as Japan and South Korea, and more recently, China. Galvanized by the coronavirus pandemic’s boost to e-commerce and remote working, financiers are jockeying to work with startups as they open up markets with a combined population of about 2 billion.

In Southeast Asia, Citigroup created a new managing director role to oversee TMT, Bloomberg News has reported. BDA Partners Inc., BNP Paribas SA, and Malayan Banking Bhd. are among the other banks that have recently made or are making sector hires in the region, people familiar with the matter said, asking not to be identified discussing internal matters.

Barclays’s India investment bank chief, Pramod Kumar, said the firm is beefing up its team in Mumbai by adding a senior posting. JPMorgan Chase & Co. is hiring a TMT banker at the executive director level, according to a person familiar with the matter.

Representatives for BNP Paribas and JPMorgan declined to comment. A representative for BDA Partners said the firm is active in India and Southeast Asia technology investment banking and will continue to hire in the space. Rajiv Vijendran, regional head of investment banking at Maybank Kim Eng Group in Singapore, said the bank is constantly looking for new areas to grow the business, including TMT.

Ashish Kehair, chief executive officer at India’s Edelweiss Wealth Management, said its investment banking unit is hiring three to five bankers with technology expertise. “Digital and technology has the force multiplier effect now,” he said.

The bankers will have their hands full. Technology, telecommunications and media deals announced in South and Southeast Asia are at a record $93 billion this year, nearly double the same period last year, according to data compiled by Bloomberg.

Consolidation of regional leaders is already taking place. Ride-hailing and payments giant Gojek agreed to combine with e-commerce pioneer PT Tokopedia in May to create the largest internet company in Indonesia. Next stop is the capital markets, where the combined firm is considering mopping up as much as $2 billion from listings at home and in the U.S. at a valuation of about $30 billion, Bloomberg News reported in July.

Tech startups in Southeast Asia and India are maturing in terms of scale and size, with many becoming unicorns and some ready to go public either through direct listings or mergers with blank-check firms, said Jwalant Nanavati, head of TMT for Asia ex-Japan at Nomura Holdings Inc. In April, the Japanese bank hired an executive director in Singapore focusing on TMT, Bloomberg News has reported.

“The pandemic provided strong tail winds in terms of faster adoption by consumers of online business models,” said Jeff Acton, a Tokyo-based partner at boutique investment bank BDA Partners. “Southeast Asia’s tech ecosystem is relatively younger, but many first-generation tech companies suddenly saw an increase in demand.”

Consumer-oriented firms have led the first wave of listings. Indonesian online marketplace PT Bukalapak.com raised $1.5 billion in August, while food ordering platform Zomato Ltd. has mobilized $1.3 billion from its Indian IPO.

“The consumer internet market in these regions is reaching critical mass and continues to show very robust growth, which has super charged the leading companies across the region,” said James Perry, managing director and co-head of Asia Pacific technology investment banking at Citigroup. “Disruption is still a major theme and investors are keen to invest in these opportunities.”

Bankers said China’s sweeping crackdown on its technology giants has benefited other countries in the region, as potential acquirers such as special purpose acquisition companies have lately shunned its startups.

Investors are waiting for greater clarity around the regulatory issues in China, said Maybank’s Vijendran. “The China crackdown has focused the attention of global players and U.S. SPACs on ASEAN startups,” he said.

“Given the high risk profile due to recent developments, we expect investors will allocate an increasing proportion into Southeast Asia,” BDA’s Acton said, adding China will still remain a crucial destination for capital.

Though Asia’s biggest economy has seen some dislocation this year because of Beijing’s policy actions, deal activity is set to return over time as that market continues to create new “exciting” companies, said Citigroup’s Perry.

“Valuation uptick in digitech is playing across all companies,” Barclays’s Kumar said. “This is a secular trend driven by the convergence of technology and traditional sectors, and this is bound to continue.”



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12 held by Delhi police for attempts of unauthorised withdrawal from high-value NRI account, BFSI News, ET BFSI

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New Delhi [India], October 19 (ANI): Delhi Police Cyber Cell on Tuesday arrested 12 people, including three HDFC bank employees, for allegedly attempting to make an unauthorised withdrawal from a very high-value NRI account.

KPS Malhotra, Deputy Superintendent of Police (DCP) (Cyber Cell), informed that as many as 66 attempts of unauthorised online transactions were made by the group on the high-value account.

“The accused had fraudulently obtained cheque book which has been recovered. Mobile phone number identical to that of account holder’s US-based phone number was also procured by the fraudsters,” the DSP stated.

“On the basis of technical evidence, footprints, and human intelligence, multiple geolocations were identified. In all, raids were conducted at 20 locations across Delhi, Haryana and Uttar Pradesh,” he further informed.

Out of the 12 accused held by the police, three are HDFC bank employees, who were involved in issuing the cheque book, updating the mobile phone number and removing the debt freeze of the account.

The matter came to light after HDFC bank filed a complaint with the Cyber Cell alleging several unauthorised attempts of withdrawal noticed in one NRI account.

“There are many unauthorised internet banking attempts noticed in one NRI bank account. Further, there have been attempts to withdraw cash from the same account, using the fraudulently obtained cheque book. Attempts were also made to get update mobile phone number in the KYC of the same bank account by replacing the already registered US mobile phone number with similar/identical Indian mobile phone number,” HDFC bank’s complaint alleged.

The police informed that in earlier instances, there were attempts of withdrawal of money from this account, and two cases were registered for the same at Uttar Pradesh’s Ghaziabad, and Punjab’s Mohali.

Further raids are in progress and investigation in the case is being carried out. (ANI)



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FPIs pull out Rs 19,000 cr from banking, financial stocks in H1; stay cautious in H2, BFSI News, ET BFSI

Personal Finance

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Amid the euphoria in the stock markets, the Foreign portfolio investors (FPIs) have pulled out close to Rs 19,000 crore from the banking and financial sectors in the first six months of the current fiscal.

On the other hand, they have raised their exposure on stocks in the defensive sectors such as consumer goods, IT, pharma and telecom.

According to sector-wise FPI flow data compiled from depositories, FPIs pulled out Rs 18,700 crore from the financial services sector between April and September. Of the total outflows, Rs 13,872 crore went from the banking sector while Rs 4,827 crore was pulled out from ‘other financial services’, which covers financial institutions, non-banking finance companies (NBFCs) and housing finance companies (HFCs).

Nifty Bank lagging far behind vis-a-vis Nifty 50 return on a YTD basis, while the leaders are Nifty Metals, Nifty Realty and Nifty IT.

Banking sector

Within the banking sector, the equity segment witnessed an outflow of Rs 12,964 crore during the April-September period while Rs 1,014 crore went out of the debt segment during H1. On the other hand, the other financial services category witnessed an inflow of Rs 1,159 crore in equities and outflow of Rs 5,797 crore from debt in the first six months of the current fiscal.

“A stand out feature of FPI flows in recent weeks is the outflows from banking and inflows into IT. Even though IT is highly valued, this segment is attracting increasing flows since earnings visibility is high in the segment while banking is struggling with poor credit growth and rising asset quality concerns, V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said.

Defensive sectors

FPIs have been investing in defensive sectors due to rising volatility with the ‘household & personal products’ sector witnessed the highest FPI inflows in the last six months at Rs 6,725 crore followed by consumer durables ( Rs 6,580 crore), retailing (Rs 6,340 crore), telecom (Rs 5,773 crore) and insurance ( Rs 2,881 crore).

Though the economy has recovered in the second half, the market participants are having a cautious outlook as there has been no big jump in loan growth and concerns on NPAs remain.

Going forward, volatility in the global markets as well as global slowdown may impact foreign flows moving into Indian shores.

Also, any direction by US Fed towards tapering of the stimulus measures would make FPI flows into emerging markets volatile and at the same time it would be crucial in dictating the direction of foreign flows into Indian equities.



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Bank of India announce rate cut on home loan, vehicle loan interest rates

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Bank of India (BoI) on Sunday announced a 35 basis points (bps) reduction in home loan interest rate and a 50 bps reduction in vehicle loan interest rate. The new interest rates are effective from October 18, 2021 till December 31, 2021.

Following the reduction, home loan interest rates will start at 6.50 per cent against the current rate of 6.85 per cent and vehicle loan interest rates will start at 6.85 per cent against 7.35 per cent. One basis point is equal to one-hundredth of a percentage point.

This special rate, which is part of the festive offer, is available for customers applying for fresh loans and also for those seeking transfer of loans, the public sector bank said in a statement.

Processing charges have also been waived for both home and vehicle loans till December-end 2021.

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HDFC Bank Q2 consolidated profit rises 18 pc to Rs 9,096 cr, BFSI News, ET BFSI

Banking & Finance

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HDFC Bank on Saturday reported an 18 per cent increase in its consolidated net profit at Rs 9,096 crore for the second quarter ended September 2021. The country’s biggest private sector lender had posted a consolidated net profit of Rs 7,703 crore in the corresponding quarter a year ago.

Total consolidated income during the quarter under review rose to Rs 41,436.36 crore from Rs 38,438.47 crore in July-September 2020, HDFC Bank said in a statement.

On a standalone basis, after providing Rs 3,048.3 crore for taxation, it earned a net profit of Rs 8,834.3 crore, an increase of 17.6 per cent over the quarter ended September 30, 2020.

The bank had earned a net profit Rs 7,513.1 crore on standalone basis in the same quarter a year ago, the statement said.

Total income (standalone) grew to Rs 38,754.16 crore in the second quarter of FY2022 from Rs 36,069.42 crore in the year-ago quarter. PTI DP MKJ MKJ



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Five banks may bid for Citi’s India consumer businesses, BFSI News, ET BFSI

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Five top lenders, including HDFC Bank and Kotak Mahindra Bank, are expected to submit binding bids for the Citi India consumer businesses before the October 26 deadline, two officials aware of the development told ET.

Axis Bank, IndusInd Bank and DBS India are also in contention for the businesses Citi is exiting in India. Although the US lender is seeking a valuation in excess of $2 billion, the bids could be more circumspect after Citi lost significant market share in its retail and credit card books, one of the executives cited above said.

HDFC Bank and Kotak Mahindra Bank, two of India’s top three most valued private sector lenders, are considered front-runners to win the business that generates about $1 billion in revenue.
“While Citi’s retail franchise remains excellent, the book has shrunk. It has lost significant market share and due to the exit plans, it has not been able to focus on enhancing the existing book and adding quality customers,” said an official involved in the bidding process.

“Still, Citi has received multiple bids from domestic banks. Plus, it is also expected to receive bids from global suitors that may be looking to pick up consumer assets in several markets the bank has exited,” the official said.

Citi India said it has received strong interest from bidders.

“We are pursuing consumer franchise sales with a focus on optimising results for our people, our clients and our shareholders,” a spokesperson for Citi India said in a mailed response to ET’s queries. “Conversations with potential buyers continue in these markets, including India, with strong interest from a broad range of bidders.”

HDFC Bank, Kotak Mahindra Bank, DBS India, Axis Bank and IndusInd Bank did not respond to ET’s mailed query.

Citibank, under its first woman CEO Jane Fraser, decided to exit retail businesses in 13 markets to conserve capital and focus on higher yielding revenue streams. The Citi management has indicated that the exit process is currently on and that while it will look to complete the exits in a timely manner, the retreats wouldn’t be anything akin to so-called fire sales.

Citi’s consumer portfolio contributes about a third to the India business on profitability while the total India business contributes 1.5% in profits to the lender’s global book.

The Indian retail basket includes credit cards, deposit accounts, wealth management and a mortgage portfolio. Overall, Citibank’s India unit had a market share of advances and deposits of 0.6% and 1.1%, respectively. In India, Citibank has more than 2.5 million retail customers, 1.2 million bank accounts and nearly 2.6 million credit cards. It lost more than 100,000 customers since announcing its exit.

The Right Mix
Although Citi is India’s sixth-largest card issuer, it has lost market share on card spends – from 20% a decade ago to 4% now. However, it has consistently logged 15-25% higher expenditure per card against the industry average, an analysis by Macquarie showed. A mix of premium cards and corporate salary account cards in the portfolio makes the Citi business attractive for bidders. “We have done due diligence on the book; it’s a good franchise for banks that don’t have an existing credit card or wealth book and it only makes sense at a good valuation. We will have to see how aggressively we bid,” said a top official at a bank that is likely to submit its bid.



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Shivalik Small Finance Bank partners with Go Digit Insurance

Banking & Finance

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Shivalik Small Finance Bank on Tuesday announced a strategic partnership with Bengaluru-based insurtech company, Go Digit General Insurance, to provide an array of instant, easy-to-understand insurance products through the bank’s network of branches across India.

This will include health insurance plans, motor insurance, and home and shop insurance. This partnership will enable over 4.5 lakh customers of Shivalik Small Finance Bank to instantly access and purchase from Digit’s list of offerings, through paperless processes, in real time.

This range of products will be available to the customers of Shivalik Small Finance Bank across all its 31 branches and its digital network across the country.

‘Committed to innovation’

Commenting on the partnership, Harsh Mittal, Chief Financial Officer, Shivalik Small Finance Bank said, “At Shivalik, we are committed to constantly innovating and adding new products and services to expand our offerings to the underbanked masses. Our collaboration with Go Digit General Insurance will aid us in making the process of buying cover, submitting and receiving claims easier for our customers leveraging the strong tech platforms that both organisations have and supported by our distribution network which reaches the far ends of Bharat.”

Vijay Kumar, CEO and Principal Officer, Go Digit General Insurance said, “Our partnership with Shivalik Small Finance Bank comes at a time when we are looking to expand our reach to newer markets with an aim to aid insurance penetration. The bank has a strong foothold in the northern states of the country and this association will help the bank’s customers in getting insured from a partner that believes in simplicity, transparency and hassle-free settlement of claims.”

Shivalik’s current customers predominantly fall into segments such as retail, manufacturing and services, housing and real estate and microfinance.

As part of its small finance bank proposition, Shivalik is actively engaged in discussions with multiple fintech partners to reach newer customer segments like entrepreneurial and underbanked women, kirana stores, millennials in need of neo banking services and individuals looking for gold loans, according to Mittal.

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