SBI’s Q1 profit jumps 55 pc to highest ever at Rs 6,504 cr, BFSI News, ET BFSI

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Mumbai (Maharashtra) [India], August 4 (ANI): Government-owned State Bank of India (SBI) on Wednesday reported its highest quarterly net profit of Rs 6,504 crore in the April to June quarter, marking an increase of 55 per cent in the year-ago period.

Operating profit increased by 5 per cent to Rs 18,975 crore in Q1 FY22 from Rs 18,061 crore in Q1FY21. Net interest income increased by 3.7 per cent year-on-year.

On the other hand, non-interest income at Rs11,803 crore grew by 24 per cent, said the country’s largest lender in a statement.

Total deposits grew at 8.82 per cent to reach Rs 37.2 lakh crore in Q1 FY22 from Rs 34.2 lakh crore in Q1 FY21. While current account deposits grew by 11.75 per cent, saving bank deposits grew by 10.55 per cent.

Domestic credit growth stood at 5.64 per cent, mainly driven by retail customers. Home loans, which constitute 23 per cent of the bank’s domestic advances, moved up by 11 per cent.

SBI said net NPA ratio stood at 1.77 per cent, down by 9 basis points. Gross NPA ratio came at 5.32 per cent, down 12 basis points.

The slippage ratio for Q1 FY22 is at 2.47 per cent from 0.6 per cent as at the end of Q1 FY21. Credit cost declined 77 basis points year-on-year to 0.79 per cent.

Cost to income ratio declined from 54.5 per cent in Q4 FY21 to 51.89 per cent in Q1 FY22 but increased by 187 basis points year-on-year, said SBI.

Capital adequacy ratio improved by 26 basis points to 13.66 per cent as on June 2021. Return on assets increased by 15 basis points to 0.57 per cent in Q1 FY22 against 0.42 per cent in Q1 FY21.

Return on equity increased by 357 basis points to 12.12 per cent against 8.55 per cent in the same period.

At 2:15 pm, SBI stock was trading 3.6 per cent higher on NSE India at Rs 462.55 per unit. (ANI)



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S&P, BFSI News, ET BFSI

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Global ratings agency S&P said has said its base case is that the global banking sector will continue to slowly stabilise as the economic rebound gains momentum and as support is gradually withdrawn. Should a re-intensification of risks occur, this will require more support from public authorities for the real economy.

For 11 of the top 20 banking jurisdictions, S&P estimates that a return to pre-Covid-19 levels of financial strength will not occur until 2023 or beyond. For the other nine, it estimates that recovery may occur by year-end 2022.

Strong support

The strong support by authorities for households and corporates over the course of Covid-19 has clearly helped banks, it said.
Lenders were also well-positioned going into the pandemic after banks bolstered their capital, provisioning, funding and liquidity buffers in the wake of the global financial crisis. S&P Global Ratings expects normalisation to be the dominant theme of the next 12 months as rebounding economies, vaccinations and state measures help banks bounce back much more quickly than was conceivable in the dark days of 2020.

“We see less downside risk for banks as economies rebound, vaccinations kick in and banks feel the stabilising effects of state intervention,” said S&P Global Ratings credit analyst Gavin Gunning.

“With no vaccine in October 2020, we believed at the time that 2021 could be a very difficult year for banks. State intervention on behalf of corporates and households — including significant fiscal and monetary policy support — is working and banks have benefited,” said Gunning.

Improving outlook

S&P’s net negative outlook for the global banking sector improved to 1 per cent in June from 31 per cent in October 2020. As at June 25, about 13 per cent of bank outlooks were negative. This is significantly lower than October 2020 when about one-third of rating outlooks on banks were negative.

Credit losses

Credit losses for Asia-Pacific banks could reach $585 billion by 2022, or nearly double the pre-Covid level raising credit costs for banks, S&P Global had said in June.

The credit costs of the Indian banking system may rise to 2.4 per cent by March 2022, compared to a base case of 2.2 per cent, according to the S&P report, “Intervention Worked: Credit Losses Set To Decline For Most Asia-Pacific Banks”.

“In India and Indonesia, where banks have suffered higher asset distress in recent years, the credit losses are set to trend closer to our expected long-term average in the coming years,” S&P had said.

Moratorium cushions blow

S&P had said moratoriums on loan repayments–together with fiscal, monetary, and policy support–have helped cushion the blow to borrowers in Asia-Pacific from the Covid outbreak and containment measures.

Credit losses are set to fall across most Asia-Pacific banking systems over the next two years, partly because targeted assistance to stretched borrowers will likely continue in many places until pandemic-related challenges substantially abate, it had said.



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New IDBI owners may get RBI road map to cut stake, BFSI News, ET BFSI

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NEW DELHI: The Reserve Bank of India (RBI) is expected to provide a road map to the new owners of IDBI Bank for reducing their stake as the government seeks to sell its equity, along with shares held by Life Insurance Corporation (LIC) of India, by the end of the current fiscal year.

Although the RBI has not firmed up its views on new licensing norms for private banks, announcement of the new structure may help generate more interest in the lender, which the Centre has been seeking to reposition for two decades but with little success.

In the past, the RBI had indicated that the government’s stake sale and announcement of the new norms were not linked. Sources, however, said that the government has been in dialogue with the RBI on stake sale and the regulator was aware of the need to provide a road map for comfort to potential buyers.

The current guidelines stipulate 40% minimum shareholding in terms of the paid up capital or voting rights. Over 10 years, this needs to be diluted to 20-30% and further reduced to 15-26% between 12 and 15 years, depending on the licence vintage. An internal group set up by the RBI had proposed reworking these, apart from allowing corporate houses into the space.

Many of the bidders may seek clarity on these aspects. Recently, the department of investment and public asset management had said that the government and LIC would decide on the extent of stake sale during the process of finalising the deal.

Although private investors are keen that the government holds no stake, something that NITI Aayog too had noted in some of its recommendations, government sources said, the idea was to leave it to bidders to decide the best course of action. “Someone may want majority control, while someone may like to do with a lower stake. Let the bidders decide,” said a source.

The government currently holds 45.5% in the financial institution-turned-universal bank with LIC’s shareholding pegged at 49.2%. On Friday, the bank’s share rose 0.4% to close at Rs 37.9 on BSE but is still lower than LIC’s acquisition price. LIC had acquired shares in IDBI Bank in three tranches.



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We have a deep conviction in the India growth story: Uday Kotak

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Private sector lender Kotak Mahindra Bank is ready to grow at a substantially faster pace and plans to invest more in technology and digital platforms, and also look at opportunities in the unsecured retail finance.

In his message to shareholders in the bank’s annual report, Uday Kotak, Managing Director and CEO, Kotak Mahindra Bank said the lender has undertaken a mindset shift to make retail and commercial lending the focus, in addition to the corporate and deposit franchise.

Home loans

“For example, we are leveraging our low cost of funds to offer a competitive interest rate on home loans. Home loans give us an opportunity to build a longer-term relationship with customers,” he said, adding that the bank will get bolder in unsecured retail finance too. The bank will hold its AGM on August 25.

Also read: Strata raises $6-mn Series A from Kotak Investment Advisors, et al

Kotak further said that the bank “will not shy away” from taking bolder bets. “Today, we have a much lighter balance sheet and with sufficient capital in our hands, we are ready to grow substantially faster, but on our terms,” he said, adding that it has a deep conviction in the India growth story and confidence in risk management capabilities.

Emphasising on the importance of technology, he said it is the epicenter around which businesses will revolve and so needs more investments.

“The other area that takes precedence for us is higher investments in strengthening our digital and technology platforms and offerings. The future may be uncertain, but we can be confident that it belongs to technology,” he said.

‘Customer-centric’

The bank will also shift its business model towards being even more customer-centric.

“While customer-first was always the byword that we lived by, the needs of the customer are now even more front and centre. Our model will revolve principally around customers and business decisions will be taken with the customer at the core,” he said.

Also read:Kotak Mahindra Bank launches emergency personal loans for Covid treatment

He also stressed on the need for inclusive and sustainable growth. “Growth that is inclusive and that takes into account the environment, is socially responsible and scores high on governance and ethics. Doing good and doing well go hand in hand,” he said.

He also underlined that for the financial sector, the disproportionate importance of risk management has come to the fore.

“The industry also needs to stop postponing the inevitable and kicking the can down the road,” he said, adding that upfront action with an eye on enduring, sustainable growth, not swayed by quarterly, short-term results is a must for the future of a healthy Indian financial sector.

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Top green energy banker sees $150 billion in India deals by 2030

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For international investors seeking a piece of India’s renewables boom — and the bankers who sit across the table with them — all roads go through the country’s domestic energy players.

That’s the message from Bank of America Corp.’s Gaurav Singhal, who leads the busiest team in India’s green energy M&A sector in the past 12 months, according to data compiled by Bloomberg. The biggest of the deals saw the US bank advising SoftBank Group Corp on selling its renewables business in India to Adani Green Energy at an enterprise value of $3.5 billion earlier this year.

The green energy arm of local tycoon Gautam Adani’s empire announced the deal in May, following reports that negotiations with the Canada Pension Plan Investment Board had fallen apart.

Adani’s group was a late entrant in the SB Energy deal, though they were aware of it, Singhal said. “The group had many advantages, from being a local player to the fact that some of the SB Energy assets were next door to their own plants.”

The deal helped make India the most active market in the world for renewables M&A in the first six months of 2021 according to BloombergNEF, and Adani and his fellow billionaire, Mukesh Ambani, have unveiled ambitious plans in the sector.

Interest by foreign players

Foreign buyers will undoubtedly continue to compete for assets; Singhal expects more than $150 billion in equity investment into the sector by 2030. Yet most strategic investors from overseas are seeking to back local entrepreneurs, he said.

“Some of the issues of dealing with the Federal government can be handled by only the local partners,” he said. “Foreign investors cannot take that call solo.”

Singhal will soon be making that pitch in person. Bank of America is moving its top renewable energy investment banker in India to New York, as it tries to grab a bigger share of what he estimates is the roughly $500 billion needed to meet the country’s green energy targets.

He’ll bring with him a slew of roles on recent cross-border deals. Global Power Synergy Pcl, the listed power unit of Thailand’s PTT Group, purchased a $453 million stake in local company Avaada Energy earlier this month. In September, Japan’s Orix Corp agreed to buy a roughly 20 per cent stake in Greenko Energy Holdings for $980 million.

“The decade I spent on this sector, which wasn’t considered hot, initially gave BofA and me a first-mover advantage,” he said.

Wall Street is a long way from Agra, the northern town where two decades ago, Singhal used to have to line up for about two hours every month to pay the bill for electricity – which was frequently interrupted. Like Singhal, who has been based in Mumbai, India’s energy sector has moved on. Coal’s market share fell in 2020, the second year in a row, as wind and solar projects become more cost-efficient and the technology improves.

The Indian green bond market is expanding rapidly this year with a total of seven issues denominated in foreign currency. Sales jumped to an all-time high of $4.1 billion this year to date, data compiled by Bloomberg show. Despite its presence in renewables M&A, Bank of America is a laggard in arranging green bonds from Indian issuers, the data show. The US lender will work on “filling that gap” in the business, Singhal said.

Local regulations in the power sector are still in flux, making it hard for overseas investors to navigate, and several of them have left. Foreign firms will have a hard time achieving scale by taking part in fiercely fought bidding wars on tariffs, Singhal said. He expects overseas institutional players to invest only in larger companies with the prowess to absorb capital and demonstrate growth, which will quicken the consolidation, he said.

Singhal will start at the New York office next month, and will continue to oversee the bank’s renewable deals in India from there.

One area where Singhal wasn’t ahead of the curve? His car, which is still gasoline-powered. When he moves to New York, he will go electric, he said.

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Central Bank of India reports standalone net profit of ₹206 crore

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Central Bank of India (CBoI) is back in the black, reporting a standalone net profit of ₹206 crore in the first quarter (Q1 FY22) on the back of healthy growth in net interest income (NII) and a substantial decline in loan loss provisions.

The public sector bank had reported a net loss of ₹1,349 crore in the fourth quarter of FY21. It posted a net profit of ₹135 crore in Q1 FY21. Net interest income/NII (difference between interest earned and interest expended) rose 41 per cent quarter-on-quarter (q-o-q) to ₹2,135 crore (₹1,516 crore in Q4 FY21).

Also read: PSBs vacating branches open doors for other lenders

However, NII in the reporting quarter was a tad lower vis-a-vis year-ago period’s (Q1 FY21) ₹2,146 crore.

Non-interest income, NPA

Total non-interest income, comprising commission, exchange & brokerage, treasury income and recoveries in written-off accounts, was down 15 per cent q-o-q at ₹767 crore (₹902 crore). But it was up 8 per cent up on year ago period’s ₹710 crore. Non-performing asset (NPA) provisions declined 98 per cent q-o-q to ₹ 76 crore (₹3,259 crore in Q4 FY21). On yoy basis too, NPA provisions fell 85 per cent. Standard assets provisions increased to ₹240 crore against a write-back of ₹ 152 crore in Q4FY21 and a provision of ₹182 crore in Q1 FY21.

Also read: Mastercard to file an independent audit report

Provisions towards restructured accounts jumped to ₹328 crore against ₹32 crore in Q4FY21 and ₹20 crore in Q1FY21. Write-back in provisions on investments was higher at ₹105 crore against ₹37 crore in Q4 FY21. In the year ago period, the Bank made a provision of ₹282 crore. Net interest margin (annualised) improved to 2.84 per cent from 2.04 per cent in Q4FY21.

Total deposits increased by 3.18 per cent y-o-y to ₹3,31,483 crore (₹3,21,252 crore in Q1FY21), with the proportion of current account, savings account (CASA) in total deposits improving to 49.20 per cent (47.30 per cent). Total advances declined 0.72 per cent yoy to ₹1,75,229 crore (₹1,76,496 crore), with retail, agriculture and MSME (RAM) advances growing 4.69 per cent and corporate advances declining 9.55 per cent.

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It’s time for digital currency to counter crypto, says RBI, BFSI News, ET BFSI

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MUMBAI: The Reserve Bank of India (RBI) has said that it is working towards a phased implementation strategy for its digital currency and examining use cases where it can be deployed with little disruption. Making a strong argument in favour of a central bank digital currency (CBDC) for India, the RBI has said that it would reduce currency costs for the government and would help offset the threat of virtual currencies.

“Developing our own CBDC could provide the public with uses that any private virtual currency can provide and to that extent might retain the public preference for the rupee. It could also protect the public from the abnormal level of volatility some of these virtual currencies experience,” RBI deputy governor T Rabi Sankar said on Thursday at a webinar organised by the Vidhi Centre for Legal Policy. Sankar added that conducting pilots on CBDC in wholesale and retail segments may be a possibility in the near future. “As is said, every idea will have to wait for its time. Perhaps the time for CBDCs is nigh,” he said.

On the consequences of digital currencies on banks, Sankar said that while it could reduce the need for maintaining deposits, the impact would be limited as they cannot pay interest. “Thus, potential costs of disintermediation mean it is important to design and implement CBDC in a way that makes the demand for CBDC, vis-a-vis bank deposits, manageable,” said Sankar.

The key issues examined by the RBI include whether these should be used in retail payments or also in wholesale payments, whether it should be a distributed ledger or a centralised ledger, whether it should be token-based or account-based, whether it should be directly issuance by the RBI or through banks and the degree of anonymity.

In a strong attack against virtual currencies (cryptocurrencies), Sankar said, “Private virtual currencies sit at substantial odds to the historical concept of money. They are not commodities or claims on commodities as they have no intrinsic value, some claims that they are akin to gold clearly seem opportunistic. For the most popular ones now, they do not represent any person’s debt or liabilities. There is no issuer. They are not money.”

The deputy governor said 86% of central banks were actively researching the potential for virtual currencies and 60% were already experimenting with the technology, and 14% are deploying pilot projects. He said that interest had spiked to replace paper and avoid the more damaging consequences of private currencies.

The deputy governor’s statement comes at a time when the RBI has been forced by a Supreme Court order to withdraw a ban on bank services to cryptocurrencies. Although the RBI has earlier spoken about plans to launch a digital currency, this is the first time that the central bank has gone into so much detail. Central banks across the world have drawn up plans to launch their digital currency to battle cryptocurrencies. China has said that its e-CNY has been tested in 70 million transactions.



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Biometric solutions for BFSI sector: IDEMIA sees ample growth opportunities in India

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IDEMIA, a global leader in biometric technologies, is looking to offer a slew of new-age biometric security and payment solutions for the Indian banking sector that is now more keen to adopting secure and convenient biometric solutions in the post-Covid world, a top official said.

“We want to be the clear technology leader for biometric solutions in the Indian market. We do recognise that India wants the best of security and convenience when it comes to biometric solutions and at the same time is price sensitive. So we are developing the next generation of products that will appeal to Indian market and make us both a volume and turnover leader here,” Pierre Alain Bauer, Senior Vice President– Biometric Devices at IDEMIA told BusinessLine.

He highlighted that there is now a huge interest in touchless biometric solutions in the Indian banking system. IDEMIA is now working to bring its new products like MorphoWave compact; F.CODE biometric payment card, Vision Pass; MOTION CODE, and Augmented Vision (software) in the Indian market.

IDEMIA, which has more than 5,000 employees in India, has already enabled one of the largest corporate adoptions of biometric security for access and attendance for India’s top banking organisations.

Besides facilitating India’s first touchless biometric attendance management system to a leading PSU, IDEMIA had recently partnered with Federal Bank, a private sector lender, to design and implement a secure biometric system that offers a smarter and more efficient working environment.

Motion code

MOTION CODE is a solution where the CVV ( 3-digit security code) behind a credit card or any other card gets changed every hour. The new code gets displayed on a mini screen display on the back of the card. This is seen as a more secure solution as it renders copying of card information useless. By the time would-be fraudsters try to use it, the stolen number will have already changed several times.

IDEMIA is looking to align with Visa or MasterCard network for the MOTION CODE technology applicable in India, Bauer said.

Augmented vision

Augmented Vision is a video investigation system that uses biometrics for the recognition of people. It involves plugging software on, say, surveillance cameras at banks to have access control on the people arriving at the banks.

Bauer expressed hope that IDEMIA will have this system implemented in one location at a large scale in India this year.

F.Code biometric card

Bauer also indicated that IDEMIA might launch in India it’s F.CODE, the world’s first biometric payment card—allowing customers to authorise payments via a fingerprint sensor. With IDMEA’s F.CODE biometric payment card, customers authorise payments via a fingerprint sensor embedded into the card. To ensure privacy, their biometric data is securely stored in the chip and never leaves the card. F.CODE answers the high demand for contactless payments regardless of the amount. With this biometric payment card, the transaction is authenticated the same instant the card is tapped.

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tarrakki, inks partnership with smallcase to offer diversified investment options, BFSI News, ET BFSI

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tarrakki, wealth management startup, today announced its strategic partnership with smallcase to offer long term equity portfolio to their users. The partnership will enable investors to invest in a well-diversified basket of stocks carefully chosen with a multi cap and multi sector strategy. The strategic collaboration further corroborates tarrakki’s mission to make investments easy, hassle-free and transparent.

AlphaQuest by tarrakki provides an easy route for users to invest in a frictionless environment harnessing technology to create an unparalleled advantage for investors at any stage of life and financial planning. With this partnership, investors can get an in-depth overview, factsheets and exposure to a professionally researched portfolio. It will enable the investors to make an informed decision while investing in a smallcase basket of stocks.

Saumya Shah, Founder, tarrakki said, “tarrakki has simplified and modernised the way to investment by giving an alternate option for investing directly in a customised model portfolio. This partnership with smallcase will help investors to intelligently invest in a diversified basket of stocks which will lower the risks present in investing in a single company or a stock. The smallcase integration makes equity investments for the investors simpler by extending the pool of investment options any user has. We look forward to empowering the wealth creation journey of Indians with innovative technological advancements and best in class products and this partnership is yet another step in that journey.”

Vasanth Kamath, Founder & CEO, smallcase Technologies Pvt. Ltd., said, “smallcase is on a mission to change how India invests by partnering with investors, advisors, brokers and other market participants who are open to game-changing innovation. Partnering with a comprehensive wealth management platform like tarrakki is in line with this mission and will encourage Indians to invest more smartly by providing an extensive range of investment options that are qualitative and unique. We are excited to work with tarrakki and enable their clients to take a long-term portfolio-based approach towards equity investing.”



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U GRO Capital ties-up with Bank of Baroda for co-lending, to disburse over Rs 1000 crore, BFSI News, ET BFSI

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U GRO Capital, a BSE listed, technology-enabled small business NBFC, today announced the launch of a co-lending partnership for micro, small and medium enterprises (MSME) with Bank of Baroda, one of the largest banks in India. Termed as ‘Pratham’, the loan disbursements have commenced on the occasion of Bank of Baroda’s 114th Foundation Day. The program has been launched under the Reserve Bank of India’s revised co-lending guidelines.

‘Pratham’, a ₹1000 crore co-lending program will allow the MSMEs to avail customized lending solutions at a competitive rate of interest with a significant reduction in turn-around time. The loan amount ranges from ₹ 50 lakh to ₹ 2.5 crores to be offered at an interest rate starting from 8% with a maximum tenure of 120 months.

Shachindra Nath, Executive Chairman and Managing Director, U GRO Capital said, “It gives us immense pleasure to launch one of our most significant programs ‘Pratham’ and sign the co-lending agreement with Bank of Baroda under RBI’s revised guidelines. It is a reiteration of the value and trust that the bank places on our ability to leverage sectoral expertise and technology to solve the unsolved credit need of the MSMEs. We look forward to nurturing this essential relationship in our bid to support more MSMEs in the remotest locations, to help them revive and grow.”

Vikramaditya Singh Khichi, Executive Director, Bank of Baroda said, “We are glad to have joined hands with U GRO Capital by way of this co-lending program, which resonates with our intent to extend support to more MSMEs. We believe that forging such partnerships is the way forward and collaborative efforts leveraging individual entities’ expertise are of utmost importance to take co-lending to the MSME segment to the next level. This is a significant advancement in the same direction.”



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