Tag: covid

Will Citi consumer biz sale fetch premium amid Covid uncertainty?, BFSI News, ET BFSI

Banking & Finance

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Citi‘s decision to exit 10 Asia-Pacific markets including India was an impact of the accelerated disruption caused by the Covid 19 pandemic which has forced large banks to refocus management bandwidth and capital across the globe.

The disruption caused by Covid has forced all banks to realign their strategy as building a localised retail model especially in India where phyigital is emerging, is tough. Also, there is competition from new lenders like Bandhan and IDFC First and small finance banks.

“We believe our capital, investment dollars, and other resources are better deployed against higher returning opportunities in wealth management and our institutional businesses in Asia,” said Jane Fraser, CEO at Citi, while announcing the shutdown of consumer banking business in Asia including in India.

With consumer business being very competitive with the lender having to invest in people, technology and process.

India consumer business

Macquarie Research has valued Citibank’s India retail business at around $2 billion, based on their Basel III disclosures in the country. This makes India the most valuable business among the 10 markets in the Asia-Pacific where Citi plans to exit consumer business. These 10 markets

are collectively valued between $6.3 billion and $8 billion by Macquarie.

According to a report by the Australian bank, going by SBI Card’s valuation, Citi’s 2.7 million cards would imply a figure of $2.7 billion. “This is above the top end of our valuation… To the extent that a single buyer is able to purchase multiple businesses at once, we would expect some sort of valuation discount in order to expedite Citi’s exit,” the report said.

“As the deal does not come with bank licences nor distribution, the sale is likely to take place in fragments. Across the region, there are very few banks who have the requisite footprint to bolt-on all of Citi’s various retail businesses,” the report had said.

The report identifies DBS, OCBC and StanChart as possible cross-border buyers, but is uncertain about HSBC. Besides the 10 Asia-Pacific markets, Citi announced its plans to exit consumer banking from three other markets — the Philippines, Poland and Russia. A Bloomberg report quoted a Citi official stating that the bank was looking to sell its entire operations in India in one go.

“We have always been open to exploring sensible bolt-on opportunities in markets where we have a consumer banking franchise and where we can overlay our digital capabilities to serve our customers better,” a representative for DBS told Bloomberg.

The reasons for exit

Also, due to regulations, Citibank was not able to build scale in consumer banking. To be sure, RBI has allowed foreign banks to set up branches or acquisitions if they shift from the current branch model to wholly-owned subsidiary model. DBS India shifted to the subsidiary model and has expanded hugely with the acquisition of Lakshmi Vilas Bank.

Citi has expanded its retail business in the early 2000s and was among the pioneers of corporate sector salary business with its Suvidha accounts, but was hit after the 2008 financial crisis globally, which saw the break up of the bank. It was then steered out of the crisis by Indian born CEO Vikram Pandit.

Citi India, which operates as a branch of the global giant, has a balance sheet size of Rs 2.18 lakh crore. HSBC with a balance sheet size of Rs 2.11 lakh crore and Standard Chartered with Rs 1.84 lakh crore in 2019-20.



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How IndusInd Bank is ready for loan growth amid Covid onslaught, BFSI News, ET BFSI

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IndusInd Bank reported a stable fourth quarter with an in-line performance, making analysts bullish on it despite the Covid pandemic.

While the bank reported year-on-year net profit growth of 190% on low base effect, its deposits grew 7% quarter on quarter, while loan growth is seeing a revival.

Deposits

Its total deposits grew by 26.8% y-o-y and 7.1% q-o-q. The 10.5% q-o-q growth in current and savings account (Casa) has helped the bank to increase its Casa ratio to 42%, bringing down its costs of funds.

While IndusInd Bank reported muted loan growth of 2.8% y-o-y and 2.6% q-o-q during the fourth quarter, the management is now focused on the loan recovery and its collection efficiency has improved from 97% to 98% q-o-q.

Its high capital adequacy ratio (CAR), its Tier 1 CAR is placed now at 16.9%, could easily support the growth in several years. With a 2.6% q-o-q increase in loan book, loan growth has made a small come back in the fourth quarter and analysts believe that IndusInd will be able to deliver around 10% loan growth in 2021-22. IndusInd also plans to expand its geographic reach by opening around 250 branches each in 2021-22 and 2022-23.

Asset quality

On the asset quality front, the Gross non-performing asset ratio improved sequentially and stood at 2.67%/0.69%, with the provision coverage ratio improving to 75% from 43% in March 2019. In addition to this, the bank holds a COVID-related provision buffer at 75 bp of loans. The restructured book stood at 2% of loans (slightly higher than the guided 1.8%), largely from the Vehicle portfolio.

IndusInd follows a conservative provisioning policy which has resulted in its provision coverage ratio (PCR) improving to 74% now from just 43% in March 20219. It has made 100% provisions for unsecured retail loans and MFI loans.

With large provisions to the tune of 3.3% of its total advances, it should be able to navigate the current turbulent times with this balance sheet cushion.

Business momentum

IndusInd reported a net profit of Rs 930 crore, in line with estimates, aided by an improvement in its core operating performance.

Net interest income grew 9% YoY to Rs 3,530 crore as the margins waere broadly stable at 4.13%. Fee income picked up sequentially and grew ~9%, while opex was broadly flat YoY.

Advances growth picked up sequentially to 2.6%, aided by improving demand. Among retail segments, the MFI/Tractor portfolio showed robust traction, while the credit card portfolio showed a declining trend. The wholesale portfolio grew 3% quarter on quarter while the retail to wholesale mix stood at 57:43.

Deposit traction remains strong at 7% QoQ to Rs 2.6 lakh crore.



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Provisions for MFI loan write-offs lead Bandhan Bank to post 80% drop in Q4 net, BFSI News, ET BFSI

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Bandhan Bank on Saturday reported an 80 per cent dip in its March quarter net profit at Rs 103 crore, as it wrote off a huge portfolio of loans in the flagship microlending business by recognising stress upfront. The bank’s post-tax profit for FY21 also reduced by 27.1 per cent to Rs 2,205 crore as a result of the hit to the business in the last quarter.

Its managing director and chief executive C S Ghosh said the bank wrote off Rs 1,929 crore of loans, a bulk of them in the microfinance segment, in the March quarter because it wanted to start the new fiscal with a clean balance sheet.

As a result of the accelerated write-off, the bank’s overall provisions shot up to Rs 1,594 crore from the year-ago period’s Rs 827 crore, which had a direct impact on the profit line. Operating profit, which is arrived at by excluding the provisions, was up 13 per cent to Rs 1,729 crore.

Its chief financial officer Sunil Samdhani said performance of the last 3-6 months was assessed before taking a call on the write-offs, and added that most of these accounts are contact-based businesses like beauty parlour, gym, school bus owner.

The bnak had restructured less than Rs 200 crore of advances in the year-ago period, and most of the loans which were written-off in the reporting quarter were microloans, he said.

Additionally, Bandhan Bank also restructured over Rs 600 crore of advances, which were majorly from the home loan book, he said, adding that with such accounts, it has got greater possibility of an account normalizing if its defers the repayments.

The gross non performing assets ratio improved to 6.8 per cent as against 7.1 per cent in December, including the proforma NPAs.

If one were to include the impact of the write-offs and NPAs, the overall repayments for the bank stand at over 98 per cent, Ghosh said, pointing out that the troubles in two key markets of West Bengal and Assam, arising due to factors like the state elections, a local law in Assam and the second wave of the pandemic, have subsided, with both the states showing collection performance at over 90 per cent.

Ghosh said that Bandhan Bank will suffer some reductions in repayments over the next two months because of the second wave induced localised lockdowns in many states.

Samdhani, however, said that the reverses on the overall economic climate front will not impact its loan growth in FY22 because advances growth mostly happens in the second half of a fiscal starting October every year. The bank, which posted a 27 per cent rise in advances for FY21, did not share an advances growth target.

The core net interest income rose by only 4.6 per cent during the reporting quarter to Rs 1,757 crore despite the advances growth. Restricting the growth was a Rs 538 crore interest reversal on recognitions made in the past on assets which turned NPAs after the Supreme Court order on asset classification, which also reduced the net interest margins by 1 percentage point to 7.8 per cent.

The non-interest income grew 57.4 per cent to Rs 787.3 crore during the quarter.

From a business growth perspective, de-risking has been prime on the agenda with limited network expansion in West Bengal and Assam, Ghosh said.

The bank has turned 11 of its training centres into COVID-care facilities to accommodate 700 beds and is also donating 500 oxygen concentrators, he said.

The overall capital adequacy ratio of the bank stood at a healthy 23.5 per cent, and was down when compared with the 27.2 per cent in the year-ago period.

The bank scrip had gained 0.80 per cent to close at Rs 297 a piece on Friday’s trade on the BSE, as against gains of 0.52 per cent on the benchmark.



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RBI asks banks to on-lend to healthcare cos in 30 days of availing credit, BFSI News, ET BFSI

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The RBI on Friday asked the banks seeking funding from the special Rs 50,000-crore on-tap liquidity window to on-lend money to the healthcare service providers within 30 days of availing the credit facility. Earlier this week, the RBI had decided to open an on-tap liquidity window of Rs 50,000 crore with tenures of up to three years at the repo rate till March 31, 2022, to boost liquidity for ramping up COVID-19-related healthcare infrastructure and services.

Under the scheme, banks can provide fresh lending support to a wide range of entities including vaccine manufacturers; importers/suppliers of vaccine and priority medical devices; hospitals and dispensaries; and pathology labs and diagnostic centres.

They will also provide finance to manufacturers and suppliers of oxygen and ventilators; importers of vaccines and COVID-related drugs; COVID-related logistics firms; and also patients for treatment.

The RBI said requests from banks desirous of availing funds from the central bank will be subject to availability of funds as on the date of application. Funds cannot be guaranteed in case the total amount of Rs 50,000 crore is already availed.

“Furthermore, banks should endeavour to lend within a reasonable period, i.e., not later than 30 days from the date of availing the funds from the RBI,” it said in a statement adding that there is no tenure restriction regarding lending by banks under the scheme.

However, the banks will have to ensure that the amount borrowed from the RBI should at all times be backed by lending to the specified segments till maturity of the scheme.

Banks are being incentivised for quick delivery of credit under the scheme through extension of priority sector lending (PSL) classification to such lending up to March 31, 2022. These loans will continue to be classified under PSL till repayment/maturity, whichever is earlier.

Banks can deliver these loans to borrowers directly or through intermediary financial entities regulated by the RBI.

“Under the scheme, banks are expected to create a COVID-19 loan book.

“By way of an additional incentive, such banks will be eligible to park their surplus liquidity up to the size of the COVID-19 loan book with the RBI under the reverse repo window at a rate which is 25 bps lower than the repo rate,” the RBI said.

Banks that want to deploy their own resources without availing funds from the RBI under the scheme for lending to the specified segments will also be eligible for the incentives.



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Covid surge sparks demand for Insolvency and Bankruptcy Code suspension yet again, BFSI News, ET BFSI

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With the Reserve Bank of India unveiling a rescue package that stops short of offering loan moratoriums, lenders now want suspension of the Insolvency and Bankruptcy Code, which was reanimated on March 24 after being suspended for a year.

Banks are planning to petition the government to keep the IBC process under suspension to help companies restructure their finance to face the renewed vigour of the pandemic, according to a report.

Also, the court proceedings are hampered due to the pandemic with courts hearing only urgent matters.

Experts are seeking an extension of IBC to 3-6 months and taking a call after that depending on the situation.

Industry body Assocham has also urged the government to reimpose a moratorium on taking debt-ridden firms to the NCLT under the IBC till December this year following the severe second wave of coronavirus. In a representation to the Finance Ministry, the chamber said that given the increasing pressure on businesses, it would be imperative to extend the NCLT (National Company Law Tribunal) moratorium to ensure that the pandemic “does not wreak havoc” on the economy.

Virtual hearings

With Maharashtra in partial lockdown to curb Covid-19 infections, experts have said that some high-stake bankruptcy cases in Mumbai could be affected by virtual hearings.

The disposal rate in virtual trials is quite low and could add to the pendency of cases if the state’s restrictions persist for a longerduration. While there has been no official notification, all case hearings in the state have shifted to the virtual platform.

There were more than 20,000 cases pending with the National Company Law Tribunal as of December 2020 and a bulk of them are with the Mumbai NCLT.

With the IBC suspension having been lifted, the number of applications is bound to increase rapidly. Online hearings could add to the existing pressure on the tribunals, which may lead to a further slowdown of resolutions through the IBC process.

The government recently issued an ordinance to provide a pre-packaged scheme – an efficient alternative insolvency resolution framework – for micro, small and medium enterprises (MSMEs). This is set to quicken the resolution process and reduce litigation.

The status of IBC cases

Out of the total 3,774 cases or corporate insolvency resolution processes (CIRPs) filed since the Insolvency and Bankruptcy Code (IBC) came into existence in 2016, 1,604 cases, or 43 percent have closed, by way of resolution, liquidation or other means. The rest 57 percent are ongoing with many overshooting the 330-day maximum time limit.

Of the 1,604 closed cases, only 14 percent have found a resolution, whereas 57 percent have ended in the liquidation of the companies.

Interestingly, the 72% cases of CIRPs ending in liquidation were already defunct and under the Board for Industrial and Financial Reconstruction.

About 312 cases have been closed on appeal or review or settled, 157 have been withdrawn; 914 ordered for liquidation and 221, saw approval of resolution plans.

The recovery rate for resolved cases under IBC is 44% with Rs 1.84 lakh crore recovered so far of the Rs 4.13 lakh crore admitted claims.

In case of the 12 large defaulters identified by RBI, the creditors recovered Rs 1.36 lakh crore from eight cases that have been resolved so far, with recoveries ranging from as low as 17 percent of claims in the case of Alok Industries, to almost 100 percent for Jaypee Infratech.



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Citi commits ₹200 crore more to support India’s Covid relief efforts

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Citi, on Wednesday, announced an additional ₹200 crore ($27 million) pledge over the next three financial years towards India’s recovery and relief efforts against Covid-19, as the country experiences a surge in cases.

Of the total pledged amount, ₹75 crore ($10 million) is being allocated immediately towards the procurement of oxygen supplies, adding beds to hospitals, diagnostic testing systems, personal protection kits and other supplies for India’s frontline healthcare workers, it said in a statement.

The funds will also be utilised towards food and hygiene supplies for low-income families.

Citigroup to exit consumer banking operations in India, 12 other markets

“We have been in India for more than 100 years, and the country is home to over 20,000 of our colleagues. We are determined to support India through this unprecedented health crisis,” said Peter Babej, Asia Pacific CEO of Citi.

₹75 crore deployed earlier

“Our efforts in India are an important part of our global commitment to fight Covid. Since the onset of the pandemic, we have focused on assisting communities around the world, including through financial support of $100 million from Citi and the Citi Foundation.”

DBS in ‘advanced talks’ to buy Citi’s consumer banking business in India

The additional pledged amount for India will also be used to fund public and private healthcare infrastructure and to impart employable skills to the youth, thereby promoting economic revival, important for India’s recovery.

“The resurgence in India, which is now overwhelming the country’s healthcare system, calls for efforts from all sections of our society to come together to bring India back on track. This is an extraordinary situation and while the need of the hour is for medical equipment, it is equally important to reinforce the country’s healthcare infrastructure for citizens’ health and safety,” said Ashu Khullar, India CEO of Citi.

Today’s announced commitment builds on the ₹75 crore Citi has already deployed in India towards pandemic relief efforts.

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RBI Governor Shaktikanta Das to make unscheduled speech today, BFSI News, ET BFSI

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By Jeanette Rodrigues

Reserve Bank of India said Governor Shaktikanta Das will make a speech Wednesday, an unscheduled appearance as ferocious new coronavirus wave devastates the country.

The address will be broadcast at 10 a.m. local time, the RBI said on Twitter, without providing further details.

The Covid-19 wave that has slammed India in recent weeks will probably worsen before it starts to taper off sometime later this month, forecasters warn. Pressure from industry groups has begun mounting on Prime Minister Narendra Modi to impose lockdowns to stem its spread, a move he has so far resisted to avoid the economic damage suffered last year.

RBI Governor @DasShaktikanta at 10:00 am today, May 05, 2021.YouTube: … https://t.co/mK8nIUhfjW” data-createdat=”1620178540000″ data-id=”1389755643620298754″>

The RBI has augmented fiscal support measures from Modi’s government with loan holidays and cash injections, as well as by cutting interest rates. It has pledged to keep monetary policy loose though its room to act has been constrained by inflation concerns.

Read: RBI steps up fight against Covid-19 second wave

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RBI Governor to deliver an unscheduled speech at 10 a.m.

Banking & Finance

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Reserve Bank of India said Governor Shaktikanta Das will make a speech Wednesday, an unscheduled appearance as ferocious new coronavirus wave devastates the country.

The address will be broadcast at 10 a.m. local time, the RBI said on Twitter, without providing further details.

The Covid-19 wave that has slammed India in recent weeks will probably worsen before it starts to taper off sometime later this month, forecasters warn. Pressure from industry groups has begun mounting on Prime Minister Narendra Modi to impose lockdowns to stem its spread, a move he has so far resisted to avoid the economic damage suffered last year.

The RBI has augmented fiscal support measures from Modi’s government with loan holidays and cash injections, as well as by cutting interest rates. It has pledged to keep monetary policy loose though its room to act has been constrained by inflation concerns.

Das has been meeting with with bankers and shadow lenders since last month to discuss topics including the current economic situation, potential stress to balance sheets, credit flows and liquidity. CNBC reported Tuesday that bankers have requested relief, including payment moratoriums, citing banking sources.

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Get vaccinated, get a discount, offers Reliance General Insurance

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In a bid to encourage Covid-19 vaccination, Reliance General Insurance has announced that it would offer additional discount to customers who are either purchasing or renewing the Health Infinity cover.

“The company aims to provide additional ease to its customers who are in the process to either buy or renew their Health Infinity insurance policy with Reliance General Insurance, by offering an additional one-time 5 per cent discount to customers who have taken the Covid-19 vaccination,” the private sector insurer said in a statement on Tuesday.

Strong winds of change set to sweep health insurance sector

Eligible if first dose taken

The additional discount will be over and above the other discounts applicable at the time of buying the policy, it further said, adding that customers who have taken the first dose of the vaccine would also be eligible for the benefit.

Health insurance premium may not rise this year

“By the means of this incentive, we want to encourage individuals to prioritise their health at this critical hour and get themselves vaccinated at the earliest,” said Rakesh Jain, CEO, Reliance General Insurance.

While vaccination was available for all citizens above 45 years of age, from May 1, anyone above 18 years of age is eligible for vaccination.

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Uday Kotak, BFSI News, ET BFSI

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Mumbai, May 3 () With the RBI capping top managements’ tenure at lenders, Kotak Mahindra Bank‘s head Uday Kotak on Monday said his current term as the managing director and chief executive is till December 2023 and the board will take a call on succession in due course. Kotak also stressed that the commitment to institution building has been a core value for the entity over the last 36 years of its existence.

The RBI last week capped MD and CEOs’ terms at private sector lenders at 15 years, from October 1 onwards, but has allowed the serving bank heads to complete their current appointments.

Uday Kotak, who is also among the promoters of the lender, has been at the helm for over 17 years already.

“The tenure for me is up to 31st December 2023. So, you are going to see me around as CEO at least till then,” Kotak told reporters at a virtual press conference.

He added that the board and the bank are fully committed to long-term stakeholder value and will do whatever is required to ensure stakeholder and shareholder value for the future.

“The commitment to institution building long term is the core to our values and we will take whatever (step) is necessary to maintain that,” Kotak said.

He added that the journey for the entity started in 1985 as a non-bank finance company with a capital of Rs 30 lakh.

To a question on succession planning, he hinted that the board does not have to wait till the RBI puts a cap, and added that in the current times of COVID-19, it is all the more necessary.

“Any financial institution or any company for that matter always plans for what happens if the senior leader gets run over by a bus. In today’s time, the risk of being affected by COVID is even higher. Therefore, succession planning has to be a continuous process which every institution constantly thinks about,” he noted.

The board will act in a manner which is appropriate and responsible, he added. AA ABM ABM.



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