Tag: Bernstein

Banks, NBFCs report jump in advances in September quarter, BFSI News, ET BFSI

Banking & Finance

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In a sign that bank credit growth may be on an uptrend, most bank and non-bank lenders reported a jump in disbursal of advances in the quarter ended September.

HDFC Bank saw its advances book grow by around 15.4% year on year at the end of the September quarter, proforma numbers released by the private sector lender showed. Its total loans aggregated to Rs 11.98 lakh crore at the end of September, up 4.4% sequentially. It’s total loans were at Rs 10.38 lakh crore at the end of September 2020.

As per the bank’s internal business classification, retail loans during the September quarter grew by around 13% year on year and 5.5% over June quarter. Commercial and rural banking loans grew by around 27.5% y-o-y while other wholesale loans grew by around 6%.

HDFC Bank has “resumed its retail growth journey” as the economy recovered from the second wave of Covid-19, said Gautam Chhuggani, director – financial at investment management firm Bernstein Research.

“We expect loan mix normalisation to be the norm in the coming quarters, with a focus on improving margins and ongoing tech transformation,” he said and noted that the bank has already reported a healthy bounce-back on new credit card issuances after the Reserve Bank of India in August lifted a ban imposed in December last year.

Mortgage lender HDFC assigned loans amounting to Rs 7,132 crore at the end of the September quarter versus Rs 3,026 crore a year earlier. It sold loans worth Rs 27,199 crore in the preceding 12 months versus Rs 14,138 crore in the previous year, regulatory filings show.

Private sector lender IndusInd Bank reported better-than-expected credit growth of 10% with total loans at Rs 2.2 lakh crore at the end of the September quarter, preliminary numbers filed with stock exchanges showed.

“The credit growth indicates underlying strong credit re-acceleration in the retail book,” said Anand Dama, senior research analyst at Emkay Financial Services. “The bank has been growing its corporate book since the June quarter and we believe that the bank is likely to have seen healthy momentum in the corporate book in September quarter as well.”

IDFC First Bank posted 9.75% growth in advances at Rs 1,17,243 crore for the second quarter ended September.

Leading non-bank lender Bajaj Finance reported it had booked 6.3 million new loans at the end of the September quarter versus 3.6 million a year ago. It’s assets under management (AUM) stood at Rs 1.66 lakh crore for the quarter under review as against Rs 1.37 lakh crore a year earlier.

Non-bank lender Mahindra & Mahindra Financial Services posted a 60% year-on-year growth in disbursements at Rs 6,450 crore at the end of the September quarter. With further improvement in mobility during September, the collection efficiency for the NBFC was reported at 100% for September 2021.

“Subject to improvement in auto supply chain, the company is hopeful of a good Q3 FY22 ahead, supported by festival season and harvest cash flow.” M&M Finance said in a statement.

Private lender Yes Bank posted a 3.6% rise in its advances to Rs 1.72 lakh crore, though retail disbursements grew at a faster rate and grew by 126.6% over last year to Rs 8531 crore at the end of the September quarter as against Rs 3764 crore a year ago.



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Bernstein, BFSI News, ET BFSI

Banking & Finance

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New Delhi, Paytm is on track to break even in 12-18 months with increased financial discipline and targeted strategic investments, investment research firm Bernstein said in a pre-IPO primer.

According to reports, Paytm is aiming to raise about $3 billion in an initial public offering (IPO) late this year, which could be the country’s largest debut ever.

The startup, backed by investors including Berkshire Hathway, Softbank and Ant Group, plans to list in India in November around Diwali.

Paytm, formally called One 97 Communications, is targeting a valuation of around $25 billion to $30 billion, as per reports.

“Paytm has come a long way from a simple digital wallet business to an integrated payments ecosystem. We believe the next stage of growth will be led by financial services, particularly delivering seamless credit tech products to consumers and merchants.

“With increased financial discipline (rare in the hyper-competitive payments space), Paytm is on track to break even in 12-18 months. We expect Paytm to continue being the largest payments and fintech ecosystem in India,” Bernstein said in its report.

Paytm has realigned its payments strategy around merchant payments leadership. Paytm’s beneficiary UPI market share (a proxy for merchant receipts) is rising month-on-month and was 16 per cent in April, the report said.

“Combine that with its digital wallet, merchant acquiring and online merchant payments, Paytm has a total throughput of $52 billion in FY21, up 33 per cent year on year,” it added.

Paytm’s credit tech vertical is likely to lead the next wave of revenue growth.

“We expect Paytm’s revenue base to double by FY23 to $1 billion with non-payments revenue contributing 33 per cent,” Bernstein said.

Paytm has crossed the proof of concept stage on consumer credit tech and merchant credit tech. Early disbursal numbers have been strong, rising month-on-month with strong bank and NBFC funding partners. Broking business with Paytm Money has also got off to a strong start, the report said.



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DBS can fund $2 billion bid for Citi India unit, Bernstein says, BFSI News, ET BFSI

Banking & Finance

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By Chanyaporn Chanjaroen

DBS Group Holdings Ltd. has sufficient capital to bid for Citigroup Inc.’s consumer assets in India valued at S$2.7 billion ($2 billion) without needing to raise additional funds, Sanford C. Bernstein & Co. analysts said.

It’s a case of “either go big or go home” for DBS to further expand in India where the Singapore-based bank also acquired Lakshmi Vilas Bank Ltd. in November, Bernstein analysts led by Kevin Kwek wrote in a report Thursday. DBS Chief Executive Officer Piyush Gupta last month said he is interested in the U.S. bank’s assets that are for sale in the South Asian country, as well as in China, Taiwan and Indonesia.

A takeover of Citi’s India unit would be DBS’s largest acquisition since 2001, when the Singapore firm spent $5.4 billion buying the Hong Kong unit formerly known as Dao Heng Bank Group Ltd. Among the U.S. bank’s assets for sale, India stands out as “the crown jewel,” Kwek wrote. Its credit card and wealth business would be attractive to any bidder given the country’s economic growth rate and population size, he added.

DBS has pledged to make more income outside its home turf, where the bank derived 70 per cent of its S$4.7 billion profit in 2020.

DBS remains very disciplined on acquisitions and wouldn’t be drawn into any “bidding frenzy,” Gupta said April 30 when asked about his interest in Citi’s asset sale.

Citi plans to exit retail banking in 13 markets across Asia, Europe, the Middle East and Africa, as part of a strategy by CEO Jane Fraser, who took over in March.

In April, DBS said it would pay S$1.1 billion for a 13 per cent chunk in China’s Shenzhen Rural Commercial Bank Corp., and Gupta has indicated an interest to raise the size of that stake.

Including the amount spent on the Chinese bank, the Bernstein analysts assumed a total budget of S$4 billion for acquisitions this year, which would bring the bank’s common equity Tier 1 ratio down to 13.1 per cent, from 14.3 per cent as of March 30. While that would still be above the regulatory minimum requirements, it may impact the firm’s dividend payout for 2021, Kwek said.

“But to be fair, earnings momentum this year looks promising, and management rhetoric will likely be that it comes back later by way of earnings, and subsequently higher payouts,” Kwek said. “Investors should ask: what does DBS believe it can do better than Citi?”



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