Sensex, Nifty capture new heights; auto, banking shares shine, BFSI News, ET BFSI

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Mumbai, Equity benchmarks Sensex and Nifty on Monday scaled new peaks by continuing their winning run to the third session in a row, propelled by gains in mainly auto, power and banking shares.

After scaling a new intraday high of 60,476.13 during the session, the 30-share Sensex closed 76.72 points or 0.13 per cent higher at 60,135.78 – marking its new closing high as well.

Similarly, the Nifty rose 50.75 points or 0.28 per cent to its all-time closing high of 17,945.95. Intraday, the NSE gauge touched a new peak of 18,041.95.

Maruti was the top gainer in the Sensex pack, rallying nearly 4 per cent, followed by PowerGrid, ITC, NTPC, SBI, M&M, Kotak Bank and HDFC Bank.

On the other hand, TCS was the top loser on the Sensex, shedding over 6 per cent, after the company’s Q2 earnings missed street expectations.

According to an Emkay Global note, TCS Q2 operating performance missed expectations, reporting lower-than-expected revenue and earnings before interest, taxes and corporate overhead or management (EBITM).

The company on Friday reported a 14.1 per cent rise in consolidated net profit at Rs 9,624 crore in the September 2021 quarter.

Following suit, Tech Mahindra, Infosys, HCL Tech and Reliance Industries fell up to 2.76 per cent.

Sectorally, BSE utilities, power, auto, metal, realty and bankex rose up to 2.80 per cent, while IT, teck, telecom and energy fell up to 2.87 per cent.

Broader midcap and smallcap indices rose up to 0.60 per cent.

Indian markets started on a positive note following positive Asian market cues as investors took comfort on news of opening up more vaccinated travel lanes in 8 countries as COVID cases declines, said Narendra Solanki, Head- Equity Research (Fundamental), Anand Rathi.

“During the afternoon session, markets continue to trade handsomely as broad gains in rate sensitive counters, viz, auto, realty and utility. Traders also took support as data showed country’s exports growing at a healthy rate. Exports have touched USD 197 billion during April-September this fiscal.

“Additional optimism came in as foreign portfolio investors (FPIs) remained net buyers to the tune of Rs 1,997 crore so far in October,” he added.

Elsewhere in Asia, bourses in Hong Kong and Tokyo ended with gains, while Shanghai was in the red.

Stock exchanges in Europe were largely trading with losses in mid-session deals.

Meanwhile, international oil benchmark Brent crude rose 2.12 per cent to USD 84.14 per barrel.

The Indian rupee ended 37 paise lower at 75.36 against the US dollar on Monday. PTI ANS MKJ



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Banks set for a sharp earnings rise in Q2, may face asset quality jitters, BFSI News, ET BFSI

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Indian banks’ earnings are likely to pick up in the September quarter, led by a recovery in business growth, fee income and a gradual reduction in credit costs.

However, they may be tempered by higher provisioning in the retail and small and medium enterprises (SME) loan segments that have seen higher delinquencies.

Earnings growth

Private banks are likely to report PPoP growth of 9% YoY (3.8% QoQ) and net profit growth of 14% YoY (17.3% QoQ). Earnings are likely to pick up, led by recovery in business growth / fee income and a gradual reduction in credit costs.

“Loan growth would pick up, led by revival in economic activity and the opening up of the economy. Demand going into the festive season and commentary around the FY22 outlook would be key monitorables. Retail and SME segment is likely to show strong recovery; though growth in the Corporate segment is likely to remain soft and recovery within this segment would be another monitorable,” according to Motilal Oswal Securities.

Banks are likely to report earnings growth of 41% in the fiscal year 2021-22, it said.

PSBs to report improved operating performance, supported by modest business growth and a gradual reduction in provisions. Opex is likely to remain elevated on account of the revised guidelines on pension provisions.

SBI NPAs may decline

As per analyst estimates, State Bank of India could post a further decline in bad loans and could see a moderation in credit costs. Private lender ICICI Bank appears firmly placed to deliver healthy sustainable growth, led by its focus on core operating performance. It may utilise higher buffers in case of a possible asset quality impact.

Exchange filings have shown HDFC Bank has posted strong credit growth in the September quarter and after the embargo being lifted on sanctioning credit cards, the bank is poised for a healthy revival in retail loans.

Estimates suggest that ICICI Bank could deliver 16.6% year-on-year loan growth, while Axis Bank and Kotak Mahindra Bank could grow over 9% each.

For state-run banks, operating expense is likely to remain elevated on account of the revised guidelines on pension provisions.

Asset quality

Asset quality could pose challenges with near-term slippages expected in the retail, SME and microfinance segments. Though analysts said there could be a decline over the June quarter.

Slippages would remain elevated, led by the Retail and SME segment; however, the quantum is likely to moderate, keeping asset quality in check – barring mid-sized banks, which could see marginal deterioration. Corporate slippages could see an uptick due to the downgrade of SREI Infra which is likely to get offset by the recoveries from DHFL resolution



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M-cap of 8 of top-10 most valued cos jump Rs 2.32 lakh cr; Reliance Industries lead gainer, BFSI News, ET BFSI

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Eight of the top-10 most valued companies together added a whopping Rs 2,32,800.35 crore in market valuation last week in-tandem with rally in the broader market, with Reliance Industries and Tata Consultancy Services emerging as the biggest gainers. Last week, the 30-share BSE benchmark rallied 1,293.48 points or 2.20 per cent. The benchmark soared past the 60,000 level on Friday.

The market valuation of Reliance Industries zoomed Rs 93,823.76 crore to reach Rs 16,93,170.17 crore.

Tata Consultancy Services added Rs 76,200.46 crore taking its valuation to Rs 14,55,687.69 crore.

The valuation of Infosys jumped Rs 24,857.35 crore to Rs 7,31,107.12 crore and that of Bajaj Finance gained Rs 12,913.91 crore to Rs 4,66,940.59 crore.

The market capitalisation (m-cap) of HDFC Bank rallied Rs 10,881.09 crore to Rs 8,87,210.54 crore.

ICICI Bank added Rs 7,403.24 crore to Rs 4,87,388.37 crore in its valuation.

The valuation of State Bank of India jumped Rs 5,310.14 crore to Rs 4,08,479.47 crore and that of HDFC gained Rs 1,410.4 crore to Rs 4,91,841.14 crore.

In contrast, the valuation of Hindustan Unilever Limited diminished by Rs 14,614.46 crore to Rs 6,20,362.58 crore.

Kotak Mahindra Bank’s market valuation also tumbled Rs 11,697.38 crore to Rs 3,83,866.29 crore.

Reliance Industries was leading the chart of the top-10 most valued companies list followed by Tata Consultancy Services, HDFC Bank, Infosys, Hindustan Unilever Limited, HDFC, ICICI Bank, Bajaj Finance, State Bank of India and Kotak Mahindra Bank. PTI SUM ANS ANS



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HDFC Bank eyes strategic investor in NBFC arm, sees $9-bn valuation, BFSI News, ET BFSI

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Months after shelving plans to list its non-banking subsidiary, HDB Financial Services, HDFC Bank has initiated a formal process to rope in a strategic investor, said people aware of the matter.

The country’s largest private lender has appointed Morgan Stanley to handle this and feelers have gone out to global banks and domestic financial institutions already. The lender is expecting a valuation of Rs 60,000-67,500 crore ($8-9 billion) although the final contours will emerge only once firm offers are placed on the table, said one of the executives cited above.

Though the initial discussions are believed to be for a 20-25% stake, some potential suitors are keen on a path to control or joint control.

The discussions are preliminary in nature, but with the management confident of asset quality improving in a post-pandemic economy, this is the right time to kickstart a monetisation exercise, said experts. Some HDFC Group watchers also see this as a precursor to an eventual listing.

Loan Book, Footprint
“While it’s still unsure what will be the quantum of stake that HDFC Bank will part with, as the parent of HDB Finance, it wants to ensure it discovers the correct value for its NBFC (nonbanking finance company) in line with other non-bank lending peers,” said a person in the know.

As a policy, the bank doesn’t comment on market speculation, said the HDFC Bank spokesperson. HDB Financial Services didn’t respond to queries.

In June 2019, then HDFC Bank managing director and CEO Aditya Puri had hinted at a possible listing. That saw the stock almost double in the grey market to around Rs 1,150 apiece for an estimated Rs 80,000 crore valuation. It has come off those highs amid growing concerns over asset quality, exacerbated during the pandemic, and is currently hovering at Rs 875 per share for a Rs 70,000 crore valuation, down from Rs 970 levels in March. Secondary market experts feel that in anticipation of a stake sale, the buying activity on the stock has risen significantly.

In a recent analyst call after the June quarter results, HDFC Bank CFO Srinivasan Vaidyanathan had said several international and domestic investors had shown interest in the growth plans of the unit and added that the bank may test the market in terms of price discovery. At its recent annual general meeting in August, managing director Sashidhar Jagdishan had said that an outside investor could be brought for price discovery.

HDB Financial’s loan book of Rs 57,390 crore as of June 30 was at about 5% of HDFC Bank’s total advances of Rs 11.47 lakh crore. The lender owns 95.3% of HDB Financial with employee trusts and a few current and former bank officials owning the rest. ET had reported in December 2019 that Puri’s family investment vehicles had netted Rs 200 crore after partially liquidating his investments. In the shadow bank cohort, its cost of funds is among the lowest. The franchise has a nationwide footprint with 1,319 branches in 959 cities. HDB has three primary business lines – enterprise lending to small and medium businesses; asset financing of commercial vehicles and electronics; and short tenor consumer loans.

Most banks have had step-down NBFC subsidiaries to service a wider pool of customers with offerings that may otherwise be difficult to fit the risk profile of a bank. But with the Reserve Bank of India continuing to push banks toward capital preservation, most bank-backed NBFCs such as PNB Housing Finance have had to seek external investors for liquidity and growth support. In January, the RBI had proposed a scale-based regulatory framework for shadow banks to segregate larger entities and expose them to a stricter set of “bank-like” rules. This is aimed at protecting financial stability while ensuring that smaller NBFCs continue to enjoy light-touch regulations and grow with ease.

“This is a pedigreed franchise with a strong parentage and a robust presence in the retail finance segment. Post the Fullerton buyout, several global franchises are keen to explore investment opportunities,” said the head of a large financial institution aware of the process, on condition of anonymity. “The final guidelines of NBFC investments is also expected shortly which will further clear the regulatory air.”

Covid blues
The second Covid-19 wave had worsened asset-quality metrics, with HDB Financial Services reporting threefold increase in gross bad loans in a year. HDB had posted a gross non-performing asset (GNPA) ratio of 7.75% as on June 30, against 2.86% in the same period a year earlier. Bad loans doubled in just one quarter, a sequential comparison of numbers showed. The GNPA ratio was at 3.89% on March 31. Over the past 10-year period, the average GNPA ratio has been 1.55% and return on equity has been 13.4%.

Net profit dropped 44% to Rs 130.6 crore at the end of the June quarter, from Rs 232.7 crore a year ago. However, analysts see 19.8% capital adequacy in FY21, despite lower net profit and higher provisioning, as a positive.

Apart from the recognised bad debt, HDB Financial had restructured loans worth Rs 5,321 crore at FY21-end, according to the company’s annual report.

“Valuations may have come off the peak but are still high at a time when that of listed non-bank lenders are near their yearly lows, reflecting the premium the HDFC Group commands in an industry otherwise struggling to generate sufficient liquidity,” another investment banker told ET. “Investors are optimistic about the NBFC’s growth as it has access to cheap sources of funds through its parent and generates high margins.”

In FY21, HDB Financial sold loans worth Rs 473 crore under securitisation, with its parent buying to the tune of Rs 379 crore, according to the latest annual report. The NBFC is required to report any related-party transactions with its parent. At its last AGM held on June 25, the company got shareholder approval to conduct securitisation transactions worth Rs 7,500 crore with HDFC Bank in the current year.



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Bank, NBFCs report spurt in Q2 advances as lending recovery picks up, BFSI News, ET BFSI

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Most banks and non-banking finance companies reported a jump in disbursal of advances in the quarter ended September in a sign that credit uptake is rising.

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. Its 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%.

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

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.

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

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.

NBFCs

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.

AU Small Finance Bank

AU Small Finance Bank Ltd’s total deposits were up 45% on year at Rs 39,030 crore as of September 30, according to provisional data from the bank. Gross advances rose 32% on year to Rs 36,405 crore. Of the total gross advances, the small finance bank restructured 800 accounts worth Rs 800 crore in July-September. Disbursements rose 57% on year and 171% on quarter to Rs 5135 crore. It also made disbursements worth 530 mln rupees under the Reserve Bank of India’s targeted long-term repo operations.

RBL Bank’s total deposits rose 17% on year as of Sep 30, according to provisional data from the bank. Deposits stood at 755.9 bln rupees, up 1% on quarter. The bank’s gross advances rose 1% on year to Rs 58,046 crore as on September 30. Of the gross advances, 55% comprised retail advances while the remaining 45% is in the wholesale category.



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

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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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ICICI Bank 2nd in card spends, ahead of SBI, BFSI News, ET BFSI

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ICICI Bank has overtaken SBI in credit card spends in August taking the number two spot after HDFC Bank. According to RBI data, ICICI Bank had a market share of 19.6% in August 2020 up from 15.8% in August 2020. SBI Card’s market share in spends, slipped to 18.7% in August 2021 from 20% in the previous year.

In absolute terms, total spending through credit cards in August 2021 was Rs 77,733 crore, up 54% from Rs 50,319 crore in August 2020. The overall number of cards in force has increased from 5.8 crore to 6.4 crore in the same period.

“Looking at total spends, since November 2020, ICICI has gained around 510 basis points market share, while HDFC Bank and SBI cards have lost around 285bps and 90bps market share, respectively. ICICI Bank’s total spends for July 2021 was equal to that of SBI cards despite ICICI Bank’s market share (based on outstanding cards) being lower than that of SBI Cards. We believe, ICICI’s co-branded card with Amazon (1.6 millon as of March 2021), which forms more than 50% of incremental card additions, has helped it to scale up its credit card business in a significant way,” said Suresh Ganapathy, an analyst with Macquarie research.

To boost credit card spending, HDFC Bank on Tuesday launched its Festive Treats 3.0 campaign, which will provide offers on cards, loans and EMIs. The bank has partnered with over 10,000 merchants across 100 locations as it expects customers to return to offline shopping following a dip in Covid cases and increased pace of vaccinations. “This year we have come out with more offline offers including hyperlocal merchants. We will use our ATM platform to inform customers about the offers around their location,” said Parag Rao, group head (payments, consumer finance, digital banking and IT).

HDFC Bank continues to be the market leader with 26.5% of total credit card spending in India. However, the bank’s share has fallen from August 2021, when it accounted for 28.7% of the total spend. Sequentially, HDFC Bank had seen a dip in credit cards in force as the RBI ban was still in force for most of the month. Since the ban was lifted the bank had added four lakh credit cards to its base of 1.47 crore cards as of August 2021.

The biggest loser in terms of share of spending is Citibank, which led the ranking in terms of card spend for many years. The multinational, which had a 7.8% share of spends in 2020 now accounts for 4.9% of spending. IDFC First Bank, a relatively late entrant, has managed to make a dent by increasing its share of card spend to over 1%. American Express is the only multinational bank to grow its share of spending from a year-ago period. However, the US issuer also faces an embargo on issuing new cards until it complies with data localization norms, which is likely to hit growth.



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HDFC Bank reports 15.4 per cent growth in advances

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Disbursements by lenders have shown a recovery in the second quarter of the fiscal, though deposits continue to outpace advances.

Private sector lender HDFC Bank reported a 15.4 per cent growth in advances to ₹ 11.98 lakh crore as of September 30, 2021 from ₹ 10.38 lakh crore a year ago.

According to its internal business classification, retail loans grew by around 13 per cent over September 30, 2020; commercial and rural banking loans grew by around 27.5 per cent over September 30, 2020; and other wholesale loans grew by around 6 per cent over September 30, 2020.

In a stock exchange filing on Tuesday, HDFC Bank said its deposits aggregated to about ₹ 14.06 lakh crore as of September 30, 2021, a growth of around 14.4 per cent over ₹ 12.29 lakh crore as of September 30, 2020.

IndusInd Bank reported a 10 per cent growth in its net advances to ₹ 2.21 lakh crore as of September 30, 2021 from ₹ 2.01 lakh crore a year ago.

Deposits grew by a sharper pace of 21 per cent to ₹ 2.75 lakh crore at the end of the second quarter this fiscal as against ₹ 2.28 lakh crore as on September 30, 2020.

IDFC First Bank reported a 9.75 per cent growth in its gross funded assets at ₹ 1.17 lakh crore as on September 30, 2021 compared to ₹ 1.06 lakh crore a year ago.

“Retail funded assets grew by 7 per cent during the second quarter of the fiscal as compared to the first quarter, out of which housing loan registered strong quarter on quarter growth of 11 per cent and other retail loans registered quarter on quarter growth of 6.3 per cent,” it said in a stock exchange filing.

Total customer deposits grew 20.8 per cent on a year-on-year basis to ₹ 83,793 crore as on September 30, 2021. However, on a quarter on quarter basis, it declined by 1.3 per cent.

Mahindra and Mahindra Financial Services announced that, in September 2021, the total disbursement at about ₹ 1,900 crore delivered a 23 per cent year-on -year growth, though it was on a lower base. During the second quarter, its total disbursements touched ₹ 6,450 crore, registering a growth of 60 per cent year on year over the second quarter of 2020-21.

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