Tag: PSU bank

Which sectors may lead and which ones may lag now, BFSI News, ET BFSI

Personal Finance

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The week gone by remained choppy. In our previous weekly note, we had mentioned that Nifty is unlikely to see a runaway rise from here on, as the technical setup as well as options data were pointing to consolidation ahead. Nifty traded in a 490-point range over the past five sessions and stayed largely in the corrective mode.
The index consolidated in a broad but defined range, as it dragged the resistance points lower. Following a stable but corrective week, the headline index closed with a net loss of 321 points (-1.80 per cent).

From a technical perspective, Nifty has marked the 17,900-17,950 zone as an intermediate top. This also gets reflected in the Options data, which shows highest Call Open Interest at strike price 18,000 after heavy Call writing activities. The previous five days saw the formation of a broad trading range in the 17,400-17,950 area. Unless the market violates either of these two points, the index should continue to oscillate in this broad range. Any major slippage below the 17,400 level will be damaging for the market.

Following heavy Put writing at 17,400 and 17,500 levels, strike price 17,500 showed highest Put OI. The coming week is likely to see Nifty attempt to stabilise with a positive bias. The 17,650 and 17,750 levels will act as potential resistance points, while support will come in at 17,400 and 17,310 levels.

The weekly RSI stood mildly overbought at the 73.30 level. The RSI was neutral and did not show any divergence against the price. The weekly MACD continued to be bullish and traded above the Signal Line. A large Black Body emerged on the candles; it reflected the directional consensus among the market participants that prevailed during the week.

Pattern analysis showed Nifty was well above the upper rising trend line support. In the event of continued corrective activity, if Nifty tests this trend line support, the next support may emerge in the 17,350-17,400 area. This trend line is drawn from the low point of March 2020 and joins the subsequent higher bottoms.

All in all, it is largely expected that while defending the 17,350-17,400 zone, Nifty may stay in a defined range and continue to consolidate. The most recent price action saw Nifty’s supports being dragged lower to 17,800 from 17,950 level. So, the 17,800 level will be the most immediate resistance if Nifty attempts to gain some stability and pulls itself back.

Over the coming days, we expect a selective sectoral outperformance in the market. There are higher chances that select banks, auto, pharma and PSE stocks will continue to do well. Shorts should be avoided and purchases must be kept highly stock-specific in the coming week.

In our look at Relative Rotation Graphs®, we compared various sectoral indices against CNX500 (Nifty500 Index), which represents over 95 per cent of the free float market cap of all the listed stocks. The analysis showed a lot of inherent strength in the market. The IT and Realty Indices are placed inside the leading quadrant. Apart from this, Nifty Energy Index and the Bank Nifty have rolled inside the improving quadrant. This showed their likely relative underperformance against the broader market.

Dalal Street Week Ahead: Which sectors may lead and which ones may lag now
Dalal Street Week Ahead: Which sectors may lead and which ones may lag now
Along with this, Media, Private Banks, PSE, PSU Bank and Auto Indices are all trading inside the lagging quadrant. However, all these indices are showing a very distinct improvement in their relative momentum against the broader Nifty500 Index. All these groups are likely to put up a resilient show over the coming days. The Nifty Services Sector Index has rolled inside the improving quadrant, while Nifty Commodities and the Metal indices are inside the weakening quadrant. They show no sign of any improvement in their relative momentum. Some stock-specific isolated performances may be seen, but the indices are likely to relatively underperform the broader market.

Important Note: The RRG™ charts show the relative strength and momentum in a group of stocks. In the above chart, they show relative performance against the Nifty500 Index (broader market) and should not be used directly as buy or sell signals.

(Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst and founder of EquityResearch.asia and ChartWizard.ae and is based at Vadodara. He can be reached at milan.vaishnav@equityresearch.asia)



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Not one PSU bank in the top 5 lenders with lowest NPAs, BFSI News, ET BFSI

Banking & Finance

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Among Indian banks, HDFC Bank has stayed on top of the list of lenders with the lowest non-performing assets.

However, there is not a single public sector bank in the top five banks with the lowest NPAs.

HDFC Bank, which has reported more than 20 per cent YoY profit growth every quarter for over 40 quarters, has never crossed 0.5 per cent of loans in net non-performing assets. In its latest quarterly results, the bank’s net NPA ratio stood at 0.48%.

For retail loans, the bank relies on the model of wide franchise and low-cost deposit base, which ensures good pricing power and sustainability of above average net interest margins.

IndusInd Bank

The second number is held by IndusInd Bank. In its latest quarterly results, the bank’s gross non-performing assets (GNPAs) stood at 2.88 per cent as it was impacted by the second wave of Covid-19 while the net NPA ratio rose 15 basis points sequentially to 0.84 per cent.

The bank leads in certain retail asset classes with a pan India franchise which gives it strength to manage the asset quality in those segments.

ICICI Bank

The third bank on the list is ICICI Bank, which despite a rise in slippages, saw the net NPAs staying lower at 1.14 per cent as on March 31, 2021, against 1.54 per cent as on March 31, 2020. In its latest quarterly results, the bank reported a net NPA ratio of 1.16 per cent.

Federal Bank

The next on the list is Federal Bank that saw gross NPAs rise to 3.5 per cent and net NPAs increase marginally to 1.23 per cent largely due to the Covid-19 related challenges faced by borrowers in the latest quarterly results.

In fiscal 2021, Federal Bank exhibited a decline in NPAs due to diligent selection of borrowers, while its slippage ratio fell to 1.6%, lower than 1.7% in 2020.

Kotak Mahindra Bank

Kotak Mahindra Bank, the third largest Indian private sector bank by market capitalisation, has seen net NPAs consistently below 1.5 per cent. In its latest quarterly results, the bank’s asset quality weakened as gross NPAs stood at 3.56 per cent. However, net NPAs still came in below 1.5 per cent. The bank’s loan book has grown at a CAGR of over 25% over the past decade, which has been supported by a healthy contribution of low-cost deposits.



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Know how banks, financials performed this week, BFSI News, ET BFSI

Personal Finance

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The Indian market seems to be in roaring bull phase, with the BSE Sensex hitting 60,000 points for the first time ever on Friday. However, the market did face some volatility this week, but investors were prompt to take the corrections as a buying opportunity.

The Sensex completed a 10,000-point journey to the 60,000-mark within months, having hit 50,000 in intraday trade for the first time in January 2021.

This is almost a global phenomenon, with China, Hong Kong and a few other countries being among exceptions as they reel in the budding Evergrande crisis. The mother market US, is leading the bulls, dismissing tapering indications from the US Federal Reserve.

Stock-specific moves, developments around China’s economy, US Fed meeting, revival of activity in Europe, improving economic data, strong vaccination numbers and healthy pick up in daily inoculations were considered to be key driving factors this week.

Monday Closing bell: Dalal Street painted red, banks and financials highly underperform

The BSE Sensex closed the day 525 points lower at 58,491. During the day, it touched a high of 59,203 and a low of 58,390. Only six of the 30 Sensex stocks ended in the green, while the Nifty50 fell 1.07% to end below the 17,400-mark at 17,396.

Broader markets also languished in trade, ending the day with deep cuts. The BSE MidCap fell 1.79% and SmallCap was down 1.84%.

The Nifty PSU Bank index majorly underperformed, closing down 4.18%. Nifty Bank ended 1.76% lower at 37,175, while Nifty Financial services ended 1.61% lower at 18,177. Bajaj Finserv was among the top Sensex gainers while SBI, Induslnd Bank and HDFC were top laggards.

Tuesday Closing bell: Indices witness smart recovery, end in green

The Indian market witnessed a smart recovery after Monday’s fall on the back of a recovery in US futures and Europe markets. At close, the Sensex was up 0.88% at 59,005, and the Nifty50 was up 0.95% at 17,562. BSE MidCap index rose nearly 1%, while the SmallCap ended flat with a positive bias.

Nifty PSU Bank ended flat with a negative bias, down by 0.05%. Bank Nifty staged a recovery to end at 37,235, with gains of 0.24%, while Nifty Financial services ended 0.73% higher at 18,310. Bajaj Finance was the top Sensex gainer on closing, up 5%, followed by IndusInd Bank and Bajaj Finserv were top Nifty gainers.

Wednesday Closing bell : Indices end flat with negative bias, banks, financials underperform

Benchmark indices Sensex and Nifty50 witnessed a tug-of-war between bulls and bears on Wednesday before closing with marginal losses. On the closing bell, BSE Sensex settled at 58,927, down 0.13% while the NSE Nifty50 closed at 17,546, slipping 0.09%.

The Nifty PSU Bank finished the day with 0.48% gains. Bank Nifty slipped 0.78% giving up 37,000 mark at 36,944, while Nifty Financial Services closed 0.86% lower at 18,152. HDFC was the worst-performing Sensex constituent, falling 1.39%, followed by ICICI Bank, Kotak Mahindra Bank and HDFC Bank.

Weekly Market Wrap Up: Know how banks, financials performed this week

Thursday Closing bell: Indices end at all-time highs; banks, financials gain over 2% each

Indian benchmark indices extended early gains and hit record high levels with the Sensex closing at 59,885, up 1.63%, and Nifty50 at 17,823, up 1.57%. The broader market outperformed the benchmarks, as BSE MidCap and SmallCap indices rose 1% each.

Bank Nifty surged 2.24% to close at 37,771, while Nifty Financial Services closed 2.28% higher at 18,566. Nifty PSU Banks finished the day with 1.19% gains. Bajaj Finserv, HDFC, Axis Bank, IndusInd Bank, State Bank of India were top Sensex gainers

Friday Closing Bell: Fresh record closing highs; Nifty ends above 17,850, Sensex crosses 60K.

The BSE Sensex crossed 60,000 for the first time ever, while the Nifty50 closed above the 17,850 level. At close, the Sensex was up 0.27% at 60,048 and the Nifty50 was 0.17% higher at 17,853. BSE MidCap index fell 1%, while smallcap index was down 0.3%.

Bank Nifty gained 0.16% to end at 37,830, while Nifty Financial Services ended at 18,630, up 0.34%. HDFC Bank, ICICI Bank and HDFC were among the top index gainers. SBI, Axis Bank and Bajaj Finance were among top laggards. The Nifty PSU Bank index shed 1.62%, dragged by losses in shares of Bank of Baroda and Canara Bank.

Key Industry takeaways

Kotak Mahindra Bank forays into healthcare financing

 Weekly Market Wrap Up: Know how banks, financials performed this week

Kotak Mahindra Bank (KMBL) on Tuesday announced that it has launched healthcare financing solutions, ranging from healthcare infrastructure loans, medical equipment finance and unsecured healthcare loans, aiming to cater to key stakeholders.

KMBL has introduced the offerings at attractive interest rates, and includes lending facilities such as the Insta Programme for quick approval of loans up to Rs 50 lakh.

Retail depositors earning negative returns; equities boom gives leeway to raise rates: SBI

Weekly Market Wrap Up: Know how banks, financials performed this week

The current bull run in financial markets is possibly a break from the past as households and now the opportune time to revisit the taxation of interest on bank deposits, said SBI.

Economists believe that, Retail depositors are earning negative returns on their bank deposits and hence, there is a need for reviewing taxes on interest earned.

If not for all the depositors, the taxation review should be carried out for at least the deposits made by senior citizens who depend on the interest for their daily needs, the economists led by Soumya Kanti Ghosh said in a note, which pegged the overall retail deposits in the system at Rs 102 lakh crore.

IIFL Finance to raise up to Rs 1,000 crore via secured bonds

Weekly Market Wrap Up: Know how banks, financials performed this week

Fairfax-backed IIFL Finance plans to raise a Rs 1,000-crore public issue of secured bonds on September 27 for business growth and capital augmentation. The bonds offer up to 8.75% yield and are rated AA/Stable by Crisil and AA+/negative by Brickwork.

The size of the issue is Rs 100 crore, with a green-shoe option to retain over-subscription up to Rs 900 crore (aggregating to a total of Rs 1,000 crore).

“The funds raised will be used to meet the credit need of more such customers and accelerate our digital process transformation to enable a frictionless experience,” IIFL Finance CFO Rajesh Rajak said.

Govt may block Chinese investment in LIC IPO as company a ‘strategic asset’

Weekly Market Wrap Up: Know how banks, financials performed this week

The government wants to block Chinese investors from buying shares in Life Insurance Corp (LIC), underscoring tensions between the two nations. State-owned LIC is considered a strategic asset, commanding more than 60% of India’s life insurance market with assets of more than $500 billion.

India has sought to limit Chinese investment in sensitive companies and sectors, banned a raft of Chinese mobile apps and subjected imports of Chinese goods to extra scrutiny.

“With China after the border clashes it cannot be business as usual. The trust deficit has significantly widen(ed),” a government official said, adding that Chinese investment in companies like LIC could pose risks, according to a report.

Govt extends Uday Kotak’s term as IL&FS chairman by 6 months

Weekly Market Wrap Up: Know how banks, financials performed this week

The government on Wednesday extended the term of Uday Kotak as non-executive chairman of debt-ridden IL&FS group by another six months.

The government through a gazette notification extended the term of Kotak, who is also the managing director and chief executive officer of Kotak Mahindra Bank, till April 2, 2022.

The notification was issued by the department of financial services in the ministry of finance dated September 21, 2021.



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Know how banks, financials performed this week, BFSI News, ET BFSI

Personal Finance

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Domestic benchmark indices Sensex and the Nifty snapped their 3-day winning run yesterday, of which state-owned banks were among the major losers. The market has been showing signs of correction, with investors resorting to profit booking after a stellar record-setting spree.

Among sectors, public sector banks lost the most, while private banks gained the most today.

On Friday, banking and financial services stocks were in focus after Finance Minister Nirmala Sitharaman announced the much-awaited bad bank.The Nifty Bank scaled the crucial 38,000-level mark for the first time ever, and a fresh lifetime high of 38,112.75.

The BSE Sensex has gained around 9% over the last month. Stock-specific moves, weak cues from Asian markets, inflation data, revival of economic activity in Europe, improving economic data and healthy pick up in India’s daily inoculations were considered key driving factors this week.

Monday Closing bell: Indices end flat on negative bias, Nifty Bank falls

Domestic equity indices ended in the red on Monday, with BSE Sensex down 0.2% at 58,177 points and Nifty 50 down 0.08% at 17,355. However, mid and smallcap stocks outperformed other sectors, with BSE Midcap index closing 0.32% higher and the smallcap index ending with a gain of 0.80%.

Nifty Bank and Nifty Financial Services closed 0.58% and 0.19% lower, respectively. ICICI Bank, HDFC Bank and SBI Life Insurance were top laggards among Sensex stocks, while Kotak Mahindra Bank, Bajaj Finserv, Chola Invest and Power Finance were top gainers.

Tuesday Closing bell: Indices end with mild gains, broader markets outperform

The BSE Sensex closed at a high of 58,247 points, up 69 points, and the Nifty 50 rose 25 points to end at 17,380, a record closing high for the benchmark. Broader markets outperformed the benchmarks as both mid and small-caps were up 1% each.

Bank Nifty opened higher and made an intraday high of 36840 but failed to sustain higher levels. It closed with a gain of 0.38%, and Nifty Financial Services closed at 18,103, down 0.13%.

Weekly Market Wrap Up: Know how banks, financials performed this week

Wednesday Closing bell : Sensex, Nifty end at record closing highs

Headline indices Sensex and Nifty 50 ended at record closing highs, with both indices up nearly 1% each. The Sensex closed at 58,723 points, up 0.82%, while Nifty closed the day at 17,519, up 0.80%. BSE Midcap and Smallcap indices closed 0.65% and 0.86% higher, respectively.

Nifty Bank closed 0.65% higher at 36,852, while Nifty Financial Services ended at 18,158, up 0.30%. SBI, IndusInd Bank and HDFC were among the top gainers, while Axis Bank and HDFC Bank were among the top laggards.

PSU bank index jumped 2.83% with J&K Bank, Bank of Baroda, IOB, Indian Bank gaining 2.7% each.

Thursday Closing bell: Market closes at record highs again; banks, financials outperform ahead of FM announcement

Domestic benchmark indices ended at record closing highs on Thursday. Banks and financials outperformed all the sectors, ahead of Financial Minister Nirmala Sitharaman’s bad bank announcement.

BSE Sensex jumped 418 points to end above 59,100 mark for the first time at 59,141, while the Nifty 50 index ended at 17,629.50, rising 0.63%. BSE Midcap and Smallcap indices also hit their fresh record highs intraday, and closed 0.48% and 0.08% higher, respectively.

Among sectors, the Nifty PSU Bank index jumped 5.43%, while the Nifty Private Bank index clocked a gain of 2.67% . The Nifty Bank index rose 2.22%, while Nifty Financial Services gained 1.09%. Induslnd Bank emerged as the top gainer jumping 7% followed by SBI, Kotak Mahindra Bank, ICICI Bank, Axis Bank and HDFC Bank.

Friday Closing Bell: Sensex and the Nifty snapped 3-day winning streak, PSU banks gain

Having scaled fresh highs in early deals, benchmark indices lost steam as investors were seen booking profits after the three-day winning streak. Losses were led by PSU banks, auto, pharma stocks. BSE Sensex ended 0.21% lower at 59,016, while the Nifty 50 index fell 0.25% to settle at 17,585. BSE Midcap index fell 1.14% and the BSE Smallcap index closed 1.06% lower.

Bank Nifty ended at 37,811, up 0.38%, while Nifty Financial Services rose 0.65% ending at 18,476. Nifty PSU Bank index fell more than 3%, with Bank of Baroda losing 4.37%, by IOB, UCO Bank and Bank of India.

Key Industry takeaways

Retail inflation softens to 4-month low in August at 5.3%

Weekly Market Wrap Up: Know how banks, financials performed this week
Retail inflation based on Consumer Price Index (Combined) eased to a four-month low of 5.3% in August due to moderation in food prices along with a high base effect, data released by the National Statistical Office (NSO) on 13 September showed.

The August inflation print is within the targeted range of 2±4 per cent of the Reserve Bank of India (RBI) though this is the seventh consecutive month of an inflation print higher than 5 per cent and 23rd consecutive month of it being above the RBI’s target of 4%.

SREI’s Rs 35,000-crore loan may be classified as NPA

Banks may classify Rs 35,000 crore loan given to SREI group as Non Performing Asset (NPA) by the end of this quarter after the National Company Law Tribunal (NCLT) set aside the previous order restraining banks from such classification.

According to analysts’ estimates, Indian Bank and Canara Bank have exposures of Rs 2,000 crore and Rs 1,200 crore, respectively, to Srei group, while ICICI Bank and Axis Bank have Rs 800 crore each.

Sebi proposes to tighten timeline for filing settlement applications

The Securities and Exchange Board of India on Tuesday proposed to tighten the timeline of settlement mechanism, whereby it suggested fixing the total timeframe for filing the application at 60 days after receipt of the notice to show cause.

The total timeframe for filing the application for settlement may be fixed at 60 days of the date of receipt of the show-cause notice or the supplementary notice, whichever is later, Sebi said in a consultation paper.

Finance Minister Sitharaman announces bad bank

Weekly Market Wrap Up: Know how banks, financials performed this week
Finance Minister Nirmala Sitharaman announced the much-awaited bad bank on Thursday, and said that the Union Cabinet approved on Wednesday the sovereign backing of up to Rs 30,600 crore for the securities receipts.

The planned National Asset Reconstruction Company Ltd (NARCL) will issue securities receipts to banks as it takes on non-performing assets from their books. These securities receipts will be valid for five years.

Mahindra Finance enters vehicle leasing and subscription business

Mahindra & Mahindra Financial Services Ltd announced on Thursday, its entry into vehicle leasing and subscription business, under the brand name ‘Quiklyz’.

Under this model, consumers can pay a monthly fee to access a vehicle of their choice across all car brands, at a lower price as against regular ownership.

IDFC Board approves initiating steps to divest mutual fund business:

Weekly Market Wrap Up: Know how banks, financials performed this week
The board of directors of IDFC Ltd and IDFC Financial Holding Co Ltd at their meetings held on Friday have considered and approved to initiate steps to divest its mutual fund business subject to requisite regulatory approvals, as applicable.

The boards have authorised respective strategy and investment committees to take necessary steps, including appointment of investment banker, for the same.



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Bad Bank to solve Rs 2 lakh crore bad loans, take NPAs off banks’ books; here’s how it will work

Banking & Finance

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Finance Minister Nirmala Sitharaman on Thursday announced that the Union government will guarantee Rs 30,600 worth of security receipts issued by the National Asset Reconstruction Company.

The Bad Bank is finally here, after a decade of discourse. It aims to help clean up banks’ books by taking over Rs 2 lakh crore bad loans. If it works as intended, Bad Bank may help cut system-wide bank NPAs (non-performing assets) by over 1%, and help recover some of bad debts too, analysts say. The National Asset Reconstruction Company (NARCL), as it is officially named, will acquire banks’ bad debt to resolve or liquidate. It will buy these stressed assets for a mix of cash, and government-guaranteed security receipts.

Finance Minister Nirmala Sitharaman on Thursday announced that the Union government will guarantee Rs 30,600 worth of security receipts issued by the National Asset Reconstruction Company (NARCL). “NARCL will acquire stressed assets through 15% cash payment to banks based on valuation and the rest 85% will be given as security receipts,” Nirmala Sitharaman said. The government-backed security receipts can only be invoked on resolution or liquidation.

What is NARCL? Why is it needed?

The National Asset Reconstruction Company (NARCL) was proposed by the Finance Minister in her Union Budget speech. NARCL, popularly known as Bad Bank, will function as an asset reconstruction company set up by banks to resolve stressed assets for smoother functioning. Public sector banks will have 51% ownership in NARCL. The bad bank intends to resolve stressed loan assets above Rs 500 crore each.

How the Bad Bank will work

Bad loan transfer: NARCL will take over bad loans worth Rs 2 lakh crore from banks, of which Rs 90,000 crore will be taken over in the first phase. The Ministry of Finance said that NARCL will acquire bad loans from banks for a mutually agreed-upon value (understandably, a net value after a haircut). NARCL will pay 15% of the agreed net value of the bad debt upfront in cash and the remaining 85% in form of security receipts. The banks would use this 15% cash upfront to reverse the debt write down. As for the security receipts for the remaining 85%, the bank would redeem those when the bad bank resolves or liquidates the bad debt; or, the bank may also trade these securities for cash.

Provision write-back: “These loans are fully provided in the books of the bank. The upfront cash received, 15% of the written-down value, would be reversed while the provisions for the balance (value of security receipts) are unlikely to be reversed even if it is fully provided,” analysts at Kotak Securities wrote in a note. “The larger release of provisions, if any, would be made as and when the cash is received on sale of these receipts or redemption of security receipts. The government guarantee on SRs can enable trading of these securities,” Kotak Securities added.

Government guarantee: The security receipts issued by NARCL are backed by the Union government guarantee. The government guarantee will cover any shortfall between the face value of the receipts and the actual realisation value of the bad loan.

Resolution is key

“How efficiently the professionals are resolving the stressed assets is to be monitored. One can argue that bad bank is likely to become a warehouse for stressed loans without expected recovery as it will be difficult to find buyers for legacy assets,” ICICI Securities said in a note. The Resolution of the proposed Rs 2 lakh crore of legacy stressed assets will lower GNPLs (gross non performing loans) by more than 2%, the note said. The estimated realisable value of 18% will lead to provisioning write-back of Rs 36,000 crore. “Through successful execution of phase-1, one can expect near term NPA reduction of >1% and NPA recoveries equivalent to 10bps of system credit,” ICICI Securities said.

Why is government guarantee needed?

The government said that resolution mechanisms of dealing with a backlog of NPAs typically require a backstop from the Government. “This imparts credibility and provides for contingency buffers. Hence, a Government Guarantee of up to Rs 30,600 crore will back Security Receipts (SRs) issued by NARCL. The guarantee will be valid for 5 years. The condition precedent for invocation of guarantee would be resolution or liquidation,” the finance ministry said.

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Analysts suddenly gung ho on this PSU bank, see up to 50% upside, BFSI News, ET BFSI

Banking & Finance

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NEW DELHI: Bank of Baroda (BoB) impressed Dalal Street with its June quarter operating performance. A double-digit growth in retail loans and an expansion net interest margin (NIM) in the challenging June quarter were noteworthy. Gross non-performing assets fell marginally, but the impact of the second wave of Covid on its retail and MSME books was visible on slippages and credit cost.

Analysts said the situation was still under control and the management commentary was strong.

They said a rebalancing of the portfolio in favour of retail and a gradual decline in the international book would support NIM for the PSU bank. This, along with a moderation in credit cost will improve the return on asset (RoA) trajectory for the bank, analysts said and suggested up to 50 per cent upside for the stock.

“BOB recently raised capital via QIP, leading to a reasonable CET 1 of 11.3 per cent. With the merger (Vijaya Bank and Dena Bank) and asset quality pain now largely over, we expect BoB’s return on equity (RoE) to gradually improve to 10-12 per cent over FY23-24 from a low of 1 per cent in FY21,” it said and suggested a price target of Rs 122.

At Monday’s close of Rs 81.15, that target suggested a 50 per cent upside.

Motilal Oswal Securities has hiked its earnings estimates by 47 per cent for FY22 and 22 per cent for FY23 post the bank’s Q1 numbers. Estimating an RoA of 0.7 per cent and an RoE of 10.3 per cent by FY23, it has upgraded the stock to ‘buy’, with a revised price target of Rs 100.

ICICIdirect also sees the stock at Rs 100. It listed four factors that would prove key to its performance. First is the shedding of the bank’s low yield exposure and its focus on retail segment. Secondly, a shift to the new tax regime, which is set to aid profitability. The third is the comfortable capital to risky asset ratio at 15.4 per cent, which may keep earnings dilution risk away. Lastly, the decent asset quality amid the tough situation would help.

The bank reported a net profit of Rs 1,209 crore compared with a loss of Rs 864 crore a year ago. Net interest income (NII) rose 16 per cent to Rs 7,892 crore. Net interest margin (NIM) came in at 3.04 per cent against 2.52 per cent YoY and 2.73 per cent QoQ.

Retail loans rose 12 per cent YoY, led by a 25 per cent growth in auto loans, 20 per cent growth in personal loans, and a 38 per cent growth in gold loans.

The loan book, however, declined 2 per cent due to a 10 per cent fall in corporate loans as the bank shed low-yielding loans.

The gross NPA ratio declined marginally to 8.86 per cent from 8.87 per cent in the March quarter and 9.39 per cent the year-ago period, as recovery and upgrades increased to Rs 4,435 crore from Rs 818 crore YoY. The bank management is targeting Rs 14,000 crore in recoveries in FY22 and has guided for 1.5-2 per cent credit cost and net slippages of less than 2 per cent.

“It was a relatively steady performance but uncertainty over subsequent Covid waves and relatively elevated stress pool still temper our enthusiasm on earnings stability. The bank’s recent capital raise was dilutive, which is a persistent challenge for PSBs. We are rolling overestimates to December FY22, revising our target to Rs 98 from Rs 95 earlier,” Edelweiss said.

Edelweiss said the demonstration of the merger value add and, indeed, getting through the current crisis without deep earnings erosion will be key to the stock performance.

The promised post-merger rationalisation benefits are not a foregone conclusion, given the complexity of the task at hand, it said and suggested that the valuation at 0.5 times FY22E P/BV lends some comfort.

JM Financial is building in a credit cost of 1.2 per cent and RoA of 0.7 per cent for FY23. It has a price target of Rs 95 on the stock.



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Analysts suddenly gung ho on this PSU bank, see up to 50% upside, BFSI News, ET BFSI

Banking & Finance

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NEW DELHI: Bank of Baroda (BoB) impressed Dalal Street with its June quarter operating performance. A double-digit growth in retail loans and an expansion net interest margin (NIM) in the challenging June quarter were noteworthy. Gross non-performing assets fell marginally, but the impact of the second wave of Covid on its retail and MSME books was visible on slippages and credit cost.

Analysts said the situation was still under control and the management commentary was strong.

They said a rebalancing of the portfolio in favour of retail and a gradual decline in the international book would support NIM for the PSU bank. This, along with a moderation in credit cost will improve the return on asset (RoA) trajectory for the bank, analysts said and suggested up to 50 per cent upside for the stock.

“BOB recently raised capital via QIP, leading to a reasonable CET 1 of 11.3 per cent. With the merger (Vijaya Bank and Dena Bank) and asset quality pain now largely over, we expect BoB’s return on equity (RoE) to gradually improve to 10-12 per cent over FY23-24 from a low of 1 per cent in FY21,” it said and suggested a price target of Rs 122.

At Monday’s close of Rs 81.15, that target suggested a 50 per cent upside.

Motilal Oswal Securities has hiked its earnings estimates by 47 per cent for FY22 and 22 per cent for FY23 post the bank’s Q1 numbers. Estimating an RoA of 0.7 per cent and an RoE of 10.3 per cent by FY23, it has upgraded the stock to ‘buy’, with a revised price target of Rs 100.

ICICIdirect also sees the stock at Rs 100. It listed four factors that would prove key to its performance. First is the shedding of the bank’s low yield exposure and its focus on retail segment. Secondly, a shift to the new tax regime, which is set to aid profitability. The third is the comfortable capital to risky asset ratio at 15.4 per cent, which may keep earnings dilution risk away. Lastly, the decent asset quality amid the tough situation would help.

The bank reported a net profit of Rs 1,209 crore compared with a loss of Rs 864 crore a year ago. Net interest income (NII) rose 16 per cent to Rs 7,892 crore. Net interest margin (NIM) came in at 3.04 per cent against 2.52 per cent YoY and 2.73 per cent QoQ.

Retail loans rose 12 per cent YoY, led by a 25 per cent growth in auto loans, 20 per cent growth in personal loans, and a 38 per cent growth in gold loans.

The loan book, however, declined 2 per cent due to a 10 per cent fall in corporate loans as the bank shed low-yielding loans.

The gross NPA ratio declined marginally to 8.86 per cent from 8.87 per cent in the March quarter and 9.39 per cent the year-ago period, as recovery and upgrades increased to Rs 4,435 crore from Rs 818 crore YoY. The bank management is targeting Rs 14,000 crore in recoveries in FY22 and has guided for 1.5-2 per cent credit cost and net slippages of less than 2 per cent.

“It was a relatively steady performance but uncertainty over subsequent Covid waves and relatively elevated stress pool still temper our enthusiasm on earnings stability. The bank’s recent capital raise was dilutive, which is a persistent challenge for PSBs. We are rolling overestimates to December FY22, revising our target to Rs 98 from Rs 95 earlier,” Edelweiss said.

Edelweiss said the demonstration of the merger value add and, indeed, getting through the current crisis without deep earnings erosion will be key to the stock performance.

The promised post-merger rationalisation benefits are not a foregone conclusion, given the complexity of the task at hand, it said and suggested that the valuation at 0.5 times FY22E P/BV lends some comfort.

JM Financial is building in a credit cost of 1.2 per cent and RoA of 0.7 per cent for FY23. It has a price target of Rs 95 on the stock.



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PNB plans single app and tailor-made products for customer engagements, BFSI News, ET BFSI

Banking & Finance

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Digital has become the synonym for the banking sector. While many banks have been trying their best to offer seamless and swift service to their customers, a few banks are also thinking of creating customised products for their customers. Sunil Soni, CGM-IT, CIO, explains how PNB is building seamless customer engagement and how they go for digital adoption considering the large presence of the banks.

Customised products

“There was a time when a bank would create a product, then go to the market and look for adoption. Given everything that has been going on in the industry, times have changed now. We need to prepare a tailor-made product and then relevantly place it in the market so that the adoption is effortless and does not create any kind of hindrance,” said Sunil Soni, CGM-IT, CIO, Punjab National Bank.

But it’s not easy, as Soni says, “A lot of market research and time goes into preparing a tailor-made product for the benefit of a segmented customer base, it is not the case of ‘one shoe- fits all’.

Discouraging customers from branch visit

As digital usage progresses, the bank would like to discourage customers from visiting banks.

“In today’s scenario, the PNB is following the type of work culture where we discourage footfall at the branches and encourage a do-it-yourself kind of an approach,”

He added that to achieve this goal they are focusing on emerging technologies.

“We are adopting technologies like machine learning, data analytics. AI and RPM, one by one. However, if you look at providing solutions, it is important to have an interplay of all these facilities,”

With a great customer base, comes great responsibility

PNB, being the second-largest PSU bank in the country, has around 11,000 branches across different geographies. Also, the bank’s wide customer base includes people from deep rural areas as well as those living in metropolitan cities. Serving such customers digitally is a big challenge.

“If we do it in the metropolitan cities, we would create a rich product like the ‘PNB one mobile banking App’. However, in a rural area internet or receiving good bandwidth could be a challenge, even availability of a branch could be a question, in such case we will have to prepare a business model that runs on a very thin network, like ‘PNB Lite’ that provides all the basic services that the people from that segment will require,” Soni said.

Banking on the millennial

Soni adds that customer engagement is the key.

“Customer engagement is the utmost priority. If banks create products and there is minimal adoption then the whole work and the capital goes to the drain and also loses an opportunity of the potential revenue,”

For PNB the millennials are the large customer base which is also the target base of customers for all the BFSI companies.

“Almost 60% of all the transactions at PNB are done by millennials. This segment doesn’t have time to walk back and look at our brick and mortar structure. We are focusing on developing a product that provides everything to our customers under one umbrella through our Mobile Banking App. Engaging with the service providers, merchants and sellers and even with companies like Swiggy will help millennials to make use of the app for almost all their day to day requirements, It will be an enriching marketing experience for us as well,” Soni explains.

PNB building modern banking

Soni says that the bank is using the topmost technologies. Currently, voice bots are being used for the PNB ONE app. Bots are encouraging collaborative banking where the availability of a customer service executive does not affect the banking experience of the customer and fastens the response time for a query. Some of our call centres or phone banking services are also being augmented with bots to provide utmost convenience and make banking faster. We are actively looking at the constant feedback from our customers on the websites and improving upon every suggestion. The complaints registered by the customers are resolved on a priority basis,”

Changes to the traditional IT model

“We have shifted from a conventional waterfall model to an agile model of programming. Earlier it would take us months to prepare a model and launch it, whereas today it hardly takes us a few weeks to bring about a small change or introduce a new product completely.” Soni explained

This article is based on the fireside discussion with Sunil Soni, CGM-IT, CIO, PNB at ETCIO BFSI Conclave.



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Kotak Mahindra Bank says glitch in its accounts due to wrong claims by a PSU bank, BFSI News, ET BFSI

Banking & Finance

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Kotak Mahindra Bank said that wrongful claims by a public sector bank on debit cards used on its point of sale (PoS) terminals has resulted in excess debits on its customer accounts.

Kotak was responding to a query by ET after twitter users complained of excess debits from their accounts.

“A PSU bank has claimed wrong amounts in the settlement file for card transactions done at merchant establishments managed by the PSU bank’s POS. This has resulted in excess debit from customers’ bank accounts on 8th March. All such excess debits have already been reversed”, Rohit Rao, Chief Communication Officer, Kotak Mahindra Group said without naming the bank.

On Monday evening Kotak account holders took to twitter to complain about the sudden loss from the bank accounts.

“Massive technical glitch in Kotak Bank, it seems. Rs 81,972 debited from my account (I don’t even have that much in all my a/cs put together). Call centre exec says ppl have lost Rs 6 lakh+ or Rs 1 lakh +, so i shouldn’t worry. Wait for 24 hours, she said,” Ravi Joshi a user said.



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Government to bring amendments to two Acts to enable privatisation of PSU banks

Banking & Finance

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To facilitate privatisation of public sector banks, the government is likely to bring amendments to two legislations later this year.

Amendments would be required in the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 and the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 for privatisation, sources said.

These Acts led to nationalisation of banks in two phases and provisions of these laws have to be changed for privatisation of banks, they said.

As the government has already announced the list of legislative business for the Budget session, it is expected that these amendments may be introduced in the Monsoon session or later during the year, sources added.

The ongoing Budget session is scheduled to take up as many as 38 Bills including the Finance Bill 2021, Supplementary Demands for Grants for 2020-21 and related Appropriation Bill, National Bank for Financing Infrastructure and Development (NaBFID) Bill, 2021, and Cryptocurrency and Regulation of Official Digital Currency Bill, 2021.

Also read: Will FM’s asset monetisation plan pay off?

Finance Minister Nirmala Sitharaman while presenting Budget 2021-22 earlier this month had announced privatisation of Public Sector Banks (PSBs) as part of disinvestment drive to garner ₹1.75 lakh crore.

“Other than IDBI Bank, we propose to take up the privatization of two Public Sector Banks and one General Insurance company in the year 2021-22,” she had said.

Later in one of the post Budget interactions, the Finance Minister had said the government will work with the Reserve Bank for execution of the bank privatisation plan announced in the Union Budget 2021-22.

“The details are being worked out. I have made the announcement but we are working together with the RBI,” she had said, when asked about the proposal.

The government last year consolidated 10 public sector banks into four and as a result the total number of PSBs came down to 12 from 27 in March 2017.

As per the amalgamation plan, United Bank of India and Oriental Bank of Commerce were merged with Punjab National Bank, making the proposed entity the second largest PSB. Syndicate Bank was merged with Canara Bank, while Allahabad Bank was subsumed in Indian Bank. Andhra Bank and Corporation Bank were amalgamated with Union Bank of India.

In a first three-way merger, Bank of Baroda merged Vijaya Bank and Dena Bank with itself in 2019. SBI had merged five of its associate banks – State Bank of Patiala, State Bank of Bikaner and Jaipur, State Bank of Mysore, State Bank of Travancore and State Bank of Hyderabad- and also Bharatiya Mahila Bank effective April 2017.

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