Tag: IDFC First

IDFC losing investor confidence over delay in value unlocking

Banking & Finance

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Investors’ patience with IDFC’s drawn out restructuring exercise seems to be wearing thin, going by their feedback to its Board and management at a pre-annual general meeting conference call.

While one investor wanted IDFC to immediately divest its stake in its asset management company (AMC), failing which he said he will reach out to other investors’ to seek a change in management, another investor, referring to the performance of the stock, alleged value destruction for shareholders.

Vinod Rai, Non-Executive Chairman, IDFC, explained that it has taken the company the last three-four years to try and simplify the entire corporate structure and it has managed to remove all the other entities, except the Bank, AMC and the Foundation. “Now, what we are grappling with today is the IDFC Foundation. It has two joint ventures under it — one is with the Government of Delhi and another is with the Government of Karnataka.”

Also read: To remain on IDFC board, Vinod Rai gives up independent director’s post

In his statement to the shareholders in the latest annual report, Rai observed that in pursuit of creating maximum value for shareholders, over the last few years the Board has been focused on cleaning up the corporate structure of the IDFC Group while awaiting the expiry of the 5-year lock in period for the Group as promoter of IDFC FIRST Bank.

The Reserve Bank of India vide their letter dated July 20, 2021, has clarified that after expiry of the ‘lock in’ period of 5 years, IDFC can exit as promoter of IDFC FIRST Bank.

Rai, who was the Comptroller and Auditor General of India between 2008 and 2013, emphasised that IDFC has engaged a security advisor in October 2020 for disinvestment of non-core activities and for drawing up a strategy, roadmap ahead, etc. The single term of reference for the advisor was maximisation of shareholder value, he added.

In the report, IDFC Chairman noted that alienation of the investments by IDFC Foundation and detachment of Foundation are a prerequisite for the optimum restructuring of IDFC for creating maximum value for shareholders.

IDFC management has been making full efforts in this direction but progress on this front has been slow in view of challenging nature of specific conditions that exist in the joint venture agreements, he added.

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MD, BFSI News, ET BFSI

Banking & Finance

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Private sector IDFC FIRST Bank is offering compensation equivalent to four times of the CTC as well as continuation of salary for two years to the families of the employees who lost their lives due to the coronavirus infection.

Among others, the bank is also offering loan waivers of such employees so that their families do not feel pressured due to the economic burden.

“The bank’s employees are usually young people. Their families will be taken by shock. So we put together a composite programme covering all angles. We are giving four times the annual CTC as compensation plus continuing the salary for two more years so that the family can get the time to economically recover,” V Vaidyanathan, Managing Director and CEO, IDFC FIRST Bank, told PTI.

The bank is taking initiative to contact the families of those deceased and informing them about what the bank has to offer to them, he added.

“Among others, as part of this scheme we are waiving employee loans as families will have to bear the burden otherwise. If an employee has taken a personal loan, car loan, two-wheeler loan or education loan, etc, that is 100 per cent waived by the bank. Housing loan waiver is up to Rs 25 lakh (before June 30, 2021),” Vaidyanathan said.

Suppose, if an employee had taken Rs 30 lakh loan, IDFC FIRST will waive Rs 25 lakh and residual loan will become 5 lakh, he explained.

“The family can pay the reduced EMI from the salary credits we will make to them for 2 years. We are asking employees to insure their loans going forward (after June),” he said.

Vaidyanathan said around 20 employees of the bank have lost their lives to Covid.

“We are reaching out to the families of the deceased employees and telling them that you are entitled to this. We will give employment to the spouse if they are eligible on merit, if not then we will give them Rs 2 lakh for skilling them,” he said.

The compensation is applicable retrospectively and will continue as long as the pandemic remains.

Among others under this ‘Employee Covid Care Scheme 2021’, the lender has made provision of scholarship of Rs 10,000 monthly to two children up to graduation, funeral expenses up to Rs 30,000, relocation assistance of Rs 50,000 as well as pro-rata bonus payout for the period served this year by the deceased employee.

Apart from this, Vaidyanathan said the bank employees have taken an initiative on their own to help the needy customers belonging to the low income group by generating a corpus from their salaries.

Under this employee funded Ghar Ghar Ration programme, the bank employees will supply ration kits to 50,000 low income customers whose livelihood has been impacted by the pandemic.

Employees are procuring ration kits comprising 10 kg rice/flour, 2 kg lentils, 1 kg sugar and salt, 1 kg cooking oil, 5 packets of spices, tea, biscuits and other essentials, he said, adding employees have contributed one day to one month’s salary for this.

He said as many as 16,000 benefits have reached across Rajasthan, MP, Maharashtra, Odisha, Gujarat, Karnataka, Haryana, Tamil Nadu, Andhra Pradesh and Chhattisgarh under this programme launched recently.

The lender has also identified 250 vulnerable families who have lost an earning member of their family to Covid-19 with a cash relief support of Rs 10,000 in a partnership with ‘Give India’.



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Why Citi, the bank that never sleeps, failed in India, BFSI News, ET BFSI

Banking & Finance

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Citi has decided to shut its India retail banking business, which includes credit cards, savings bank accounts and personal loans, as part of a global decision to exit 13 markets as the US-based lender focuses on a few wealthy regions around the world.

But why did the lender, which is profitable and has the biggest balance sheet among foreign banks which operate on a branch model in India, shut shop abruptly.

“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 decision.

The reasons

Citi’s decision to exit the market is 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, according to experts.

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.

Also, due to regulations, the bank 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.

Global focus on a wealthy few

“As a result of the ongoing refresh of our strategy, we have decided that we are going to double down on wealth,” Fraser said. The move to focus on the remaining markets “positions us to capture the strong growth and attractive returns the wealth management business offers through these important hubs.”

Under the new CEO Jane Fraser, who took charge a month ago, Citigroup’s equities desks, undersized among Wall Street’s giants, are proving strong enough to lift the firm to a record quarterly profit just as a new chief executive officer takes the helm.

SPACs all the way

The bank reaped the most revenue from stock trading in the first quarter since 2009, while fees from underwriting shares quadrupled, helped by the firm’s dominance in taking blank-check companies known as SPACs to public markets. That offset a slump in revenue from Citigroup’s massive fixed-income trading division.

“It’s been a better-than-expected start to the year,” Fraser said as she credited the “strong performance” of the company’s Wall Street operations and said the firm is optimistic about its outlook for the economy.

Citigroup has raised more than any other bank for special-purpose acquisition companies this year, as managers of the vehicles set out to hunt unspecified takeover targets. That helped the firm reap $876 million in fees from equity underwriting. Quarterly stock-trading revenue, typically less than $1 billion at Citigroup, surged to $1.48 billion.



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