HDFC Life Insurance Q2 net profit down 16%

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HDFC Life Insurance registered a 15.9 per cent drop in its net profit to ₹274.16 crore in the second quarter of the fiscal as against ₹326.09 crore in the same period last fiscal.

“Our profit after tax stands at ₹577 crore for the first half of 2021-22, which is 26 per cent lower than the first half of 2020-21, on the back of higher claims reserving warranted by the second wave of the pandemic,” said Vibha Padalkar, Managing Director and CEO, HDFC Life Insurance.

Also read: How lucrative is HDFC Life’s acquisition of Exide Life

For the quarter ended September 31, 2021, net premium income increased by 13.9 per cent to ₹11,443.96 crore from ₹10,045.44 crore a year ago. The insurer settled around two lakh claims in the first half of the fiscal. Gross and net claims amounted to ₹3,640 crore and ₹2,466 crore, respectively.

“The overall experience has been in line with our projections and we carry an Excess Mortality Reserve (EMR) of ₹204 crore into the second half of 2021-22,” said Padalkar.

Its solvency ratio was at 190 per cent as on September 30, 2021 compared to 203 per cent a year ago. Its 13th month persistency was at 84.8 per cent as on September 30, 2021 versus 83.9 per cent as on September 30, 2020.

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Federal Bank Q2 net profit up 49.6%

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Federal Bank reported a 49.6 per cent jump in its standalone net profit at ₹460.26 crore in the second quarter of the fiscal from ₹307.62 crore in the corresponding period a year ago.

This was aided by higher net interest income and lower provisions.

For the quarter-ended September 30, 2021, Federal Bank reported a net interest income growth of 7.2 per cent to ₹1,479.42 crore versus ₹1,379.85 crore a year ago.

Other income marginally fell by 1 per cent on an annual basis to ₹444.46 crore in the second quarter of 2021-22.

Net interest margin stood at 3.2 per cent as on September 30, 2021.

Provisions fell by 53.9 per cent to ₹245.33 crore in the second quarter compared to ₹532.09 crore a year ago.

Asset quality

Gross non-performing assets stood at 3.24 per cent of gross advances as on September 30, 2021 from 2.84 per cent on September 30, 2020. It, however, fell on a sequential basis from 3.5 per cent as on June 30, 2021.

Net NPA stood at 1.12 per cent of net advances at the end of the second quarter from 0.99 per cent a year ago and 1.23 per cent as on June 30, 2021.

Provision Coverage Ratio (including technical write-offs) stood at 79.33 per cent.

“We witnessed strong traction in NIM and pick-up in NII on the back of good credit growth in certain segments. Strong recovery and upgrades helped in virtually no credit cost for the quarter,” said Shyam Srinivasan, Managing Director and CEO, Federal Bank, adding that the digital story of the bank continues to prosper with fintech partnerships progressing well and contributing to over 50 per cent of new accounts booked.

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2 Hotel, 1 Finance Stocks To Buy According To ICICI Securities

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Buy TAJGVK Hotels with upside potential of 40%

TAJGVK Hotels is a premium hotel company centered in Hyderabad, with 67 percent of revenues coming from the city (pre-Covid).

ICICI Direct sees gains of nearly 40% on the stock of TAJGVK Hotels and has set a target price of Rs 210, as against the current market price of Rs 150.

Reports first-ever profits post March 2020 quarter

According to brokerage, with a robust rebound in revenues and managed fixed expenses, the firm declared its first quarterly net profit of Rs 1.2 crore after Q4FY20 in Q2FY22. From H2FY22 onwards, we expect strong traction in premium sector hotel room revenues. Furthermore, the ongoing crisis may result in a 15% to 18% reduction in room inventory, which bodes favorably for the company in the long run. Over FY21-23E, we anticipate a robust 79.8% revenue CAGR. In FY23E, we estimate the company’s business to recover to 94% of pre-Covid levels, with EBITDA exceeding pre-Covid levels. In FY23E, margins are expected to be over 26%, with the potential to rise to 30% or more.

Target and Valuation

“On a replacement basis, the stock is trading at EV/room of Rs 1 crore, at a significant discount to current replacement costs. We remain positive on the company and maintain our BUY rating Target Price & valuation: We value the company at Rs 210 i.e.18x FY23E EV/EBITDA,” the brokerage has said.

Buy Indian Hotels with upside potential of 21%

Buy Indian Hotels with upside potential of 21%

Through owned/managed hotels throughout the United States, the United Kingdom, Africa, Sri Lanka, the United Arab Emirates, and the Maldives, Indian Hotels has a select presence in the luxury market.

Leisure rebounds; business travel to follow soon

ICICI Direct sees gains of nearly 21% on the stock of Indian Hotels and has set a target price of Rs 250, as against the current market price of Rs 206.

Q2FY22 Results

In Q2FY22, Indian hotels experienced a strong resurgence, with revenue reaching 72 percent of pre-Covid levels. Indian Hotels’ revenues increased by 184 percent year on year and 111 percent quarter on quarter to Rs 8.4 crore in Q2FY22. EBITDA was Rs 72.8 crore, while the net loss was Rs 120.6 crore, compared to a loss of Rs 230 crore last year and a loss of Rs 277 crore the previous quarter.

Target and Valuation

“Along with the improved outlook, the company is also focusing on driving more efficiencies through cost optimization. We remain positive on the company and maintain our BUY rating Target Price and Valuation: We value IHCL at Rs 250 i.e.31x FY23E EV/EBITDA,” the brokerage has said.

Buy IEX with upside potential of 19%

Buy IEX with upside potential of 19%

The Indian Energy Exchange (IEX) is the country’s leading electrical exchange, facilitating electricity trade.

Sturdy revenues backed by high EBITDA margins

ICICI Direct sees gains of nearly 19% on the stock of the Indian Energy Exchange and has set a target price of Rs 910, as against the current market price of Rs 764.

Q2FY22 Results:

The IEX announced strong results for Q2FY22.

At Rs 110.4 crore, revenue was up 55.6 percent year over year and 21.3 percent quarter over quarter. In Q2FY22, EBITDA was at Rs 95 crore, up 71.4 percent year on year, with margins at 86.1 percent. Consequent PAT wasRs 77.4 crore in Q2FY22, up 74.6 percent YoY and 24.6 percent QoQ.

Target and Valuation

“For the past year, IEX has remained richly valued given its clean balance sheet, near-monopoly and bright future prospects. We continue to remain positive and retain our BUY rating on the stock. Target Price and Valuation: We value IEX at Rs 910 i.e. 57x P/E on FY24E EPS,” the brokerage has said.

Disclaimer

Disclaimer

The above stocks are picked from the brokerage report of ICICI Securities. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.



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Housing Finance, Hotel Stocks To Buy For Up To 25% Returns

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Buy Indian Hotels, says Motilal Oswal

Motilal Oswal sees gains of nearly 27% on the stock of Indian Hotels and has a set a target price of Rs 268, as against the current market price of Rs 204.

“Indian Hotels standalone RevPAR nearly doubled on a QoQ and YoY basis owing to ARR growth and occupancy improvement. This came on the back of positive consumer sentiment on travel, leisure travel led recovery, and the resumption of business travel. Additionally, Indian Hotels operating performance was strong on account of cost-saving measures and operating leverage,” the brokerage has said.

Indian Hotels board has also approved the purchase of 39.8% shares of Roots Corporation at a maximum acquisition cost of Rs 5 billion, consequently making Roots Corporation a wholly owned subsidiary of Indian Hotels.

Indian Hotels: Price target of Rs 204

Indian Hotels: Price target of Rs 204

“Revenue/EBITDA for the quarter came in above our estimates. Factoring in the same and better demand visibility, we increase our EBITDA estimates for FY22/FY23/FY24 by 29%/13%/11%. We maintain our Buy rating on the stock, with SoTP-based target price of Rs 268,” on the stock.

“While FY21 earnings are weak, we expect gradual recovery in FY22E and sharp recovery in FY23E on (a) a low base, (b) improvement in ARR once normalization is achieved, (c) improved occupancies, (d) positivity in cost rationalization efforts in FY21, (e) an increase in F&B income as banqueting and conferences resume, and (f) higher income from management contracts. Recovery in business travel is key to watch out for going forward,” the brokerage has said.

Buy Can Fin Homes, says Motilal Oswal

Buy Can Fin Homes, says Motilal Oswal

Can Fin Homes loan growth was recently muted due to extreme aggression from Banks and large housing finance companies.

“It navigated that period by compromising on its spreads/margin to protect its customers from being poached by the competition. That strategy has reaped dividends, and Can Fin Homes is again embarking on a strong growth trajectory without having to compromise on its spreads/margin. Despite the total restructured pool being slightly higher than the management’s guided levels of 2%, its asset quality is the most pristine and credit costs should remain benign in a post-pandemic normalized world. We would look to revise our estimates and target post its concall on 22nd Oct’21,” the brokerage has said.

Disclaimer

Disclaimer

The above stocks are picked from the brokerage report of Motilal Oswal. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.



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HDFC Life expects muted third wave, says reserves should suffice for future claims, BFSI News, ET BFSI

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HDFC Life Insurance‘s reserves will be sufficient for future claims as the intensity of any subsequent COVID wave will be muted, said Vibha Padalkar, managing director and chief executive officer of HDFC Life Insurance, at the quarterly results‘ press conference.

The insurer is bullish on the impact of COVID, as the number of vaccinations have the crossed 1-billion mark. ” In addition, the recent macroeconomic data augurs well for the economy and is indicative of swifter recovery trends. Consumer sentiment remains buoyant and we are optimistic about sustained increase in business in the coming few months,” the company said in a filing.

The life insurer on Friday announced a 15.9% fall in its consolidated net profit to Rs 274.16 crore in Jul-Sep, as against Rs 326.09 crore a year ago.

Padalkar is optimistic about the second half of FY22, citing new bancassurance partnerships and agency channels. On the acquisition of Exide Life Insurance Co, Padalkar expects HDFC Life to receive the approval from the regulator by late third quarter or early fourth quarter.

Total income of the insurer in the second quarter, however, rose to Rs 20,478 crore against Rs 16,426 crore a year ago, while the net premium income increased by 52% to Rs 11,445 crore from Rs 10,056 crore, the insurer said in a regulatory filing.

“Value of new business (VNB) recorded a robust 30% growth to Rs 1,086 crore over last year. Our profit after tax stands at Rs 577 crore for H1, 26% lower than H1 FY21, on the back of higher claims reserving warranted by the second wave of the pandemic,” said Padalkar.

The insurer settled around two lakh claims in the first half of the fiscal. Gross and net claims amounted to Rs 3,640 crore and Rs 2,466 crore, respectively, against an anticipated net claims of Rs 1,690 crore, the management said in a post-earnings call. The excess Rs 776 crore was paid out of reserves, which stood at Rs 204 crore as on 30 September.

The company’s overall experience has been in line with their projections, and an Excess Mortality Reserve (EMR) of Rs 204 crore is being carried into the second half of FY22, the company said in a filing. Its solvency ratio was at 190% compared with 203% a year ago, while its 13th month persistency was at 84.8% against 83.9% around the same period last fiscal.



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

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The Indian equity market witnessed volatility during the week, with domestic benchmark indices ending in the red in four out of five sessions. The Nifty50 on Friday closed at 18,114, with more than 1% weekly loss, but investors were prompt to take corrections as a buying opportunity.

The Nifty Bank remained the star performer, crossing the 40,000-mark, with more upside to come in banks. Banks, including PSU banks, were the main sectoral gainers while FMCG, Metals, Realty, Pharma and Auto were the largest losers.

According to experts, immediate support for Nifty50 is coming near the 18,000-mark. If the index manages to hold above the mark, the market can expect a swift pullback. Meanwhile, resistance is seen near 18,250-18,350.

Festival demand outlook, Jul-Sep earnings data backed by recovery in economic activity, vaccination numbers crossing 1 bln mark, developments around Asian markets, healthy FPIs and exports data, strong industrial production data, developments around the US economy, inflation fears, global energy crisis, were key driving factors this week.

Weekly Market wrap up: Know how banks, financials performed this week

Monday Closing bell: Market closes higher for seventh session, Nifty PSU Bank gaining nearly 4%

Extending their winning streak into seventh straight session, Indian indices ended with record gains on Monday, led by banks and financial stocks. The Sensex hit a record high of 61,963, while Nifty touched an all-time high of 18,525 intraday.

At the end of the day’s trade, the Sensex settled 0.75% higher at 61,765, while Nifty50 added 0.76% to close at 18,477. The broader market was positive, with midcap and smallcap stocks also clocking stellar gains.

The Nifty PSU Bank outperformed with nearly 4% gains to close at 2,824. The Nifty Bank index also ended the day with strong gains and ended 0.87% higher at 39,864, while Nifty Financial Services closed 0.46% higher at 19,034. Most of the banking stocks had a good run on Monday after strong numbers posted by HDFC Bank.

Tuesday Closing bell: Dalal Street closes in red, snaps seven-day winning streak

Sensex, Nifty witnessed a volatile session on Tuesday, ending in the red after having touched fresh all-time highs earlier in the day. At the closing bell, S&P BSE Sensex finished 0.08% lower at 61,716, while NSE Nifty 50 ended the day at 18,418, down from an intraday high of 18,604.

Broader markets fared worse than the benchmark indices to end deep in the red as Nifty Midcap 50 closed 2.22% lower, while the Smallcap 50 was down 1.47%

The Nifty Bank index touched 40,000 intraday but closed 0.36% lower at 39,540, while Nifty Financial Services ended flat with positive bias to close 0.18% higher at 19,068. After gaining nearly 4% in the previous session, Nifty PSU Bank Index ended 3.74% lower on Tuesday.

Weekly Market wrap up: Know how banks, financials performed this week

Wednesday Closing bell: Bears pull down benchmark indices, Bank Nifty close flat with marginal losses

Domestic equity indices continued to fall for the second consecutive session on Wednesday amid heightened volatility. S&P BSE Sensex 0.74% lower at 61,259, while the NSE Nifty 50 index fell 0.83% to settle at 18,266.

In broader markets, the BSE Midcap index shed 1.9% to close at 25,915, and the Smallcap index tumbled 2.3% to end at 28,879.

The trend remained largely negative, with only PSU bank indices closing in the green, up 1.54%. Bank Nifty closed flat with marginal loss of 0.6% at 39,518, while Nifty Financial Services closed 0.58% lower at 18,957. SBI, IndusInd Bank, and Bajaj Finance were the top gainers on the Nifty50 index while Bajaj Finserv was among the top laggards.

Thursday Closing bell: Market ends flat with negative bias, banks and financials outperform

A flat recovery, led by select financial shares, helped key benchmark indices recoup some of their losses. BSE Sensex fell over from the day’s high to end below the 61,000-mark at 60,923. The Nifty50 also oscillated between 18,384 and 18,048 during the day before signing off at 18,178.

The broader markets moved in tandem, with the BSE Midcap and Smallcap indices falling 0.4% and 0.7%, respectively.

The Nifty Bank index, meanwhile, ended 1.3% higher at 40,030 after hitting a new record high of 40,200 intra day, while Nifty Financial Services gained 1.22%, closing at 19,188. Kotak Mahindra Bank rallied 6.5% to close as the top Sensex gainer, followed by HDFC, ICICI Bank and SBI.

Stealing the show, Nifty PSU Bank index added nearly 3%, led by Union Bank of India, Indian Bank, Bank of Maharashtra, UCO Bank, and PNB.

Friday Closing bell: Markets end in red for fourth session, banks and financials fare well

Bulls attempted to make a comeback during the early trade on Friday but failed to hold their ground, forcing Dalal Street to close in the red for the fourth day running.

At close, S&P BSE Sensex fell 0.17% to close at 60,821 while NSE Nifty 50 dropped 0.35% to end at 18,114. Midcap and small-cap indices fared worse than largecap peers, lossing more than 1% each.

Bank Nifty index continued to outperform , closing at 40,323, up 0.73%, while Nifty Financial Services closed 0.59% higher at 19,302. Nifty PSU Bank ended the day with a loss of 0.47%.

HDFC was the top Sensex gainer, jumping 2.25%, followed by IndusInd Bank, and Kotak Mahindra Bank. PNB, Power Finance and Chola Invest were among top drags.

Banks and financial services- September quarter results

Weekly Market wrap up: Know how banks, financials performed this week

HDFC Bank: the bank on Saturday reported a standalone net profit of Rs 8,834 crore, up 18% from Rs 7,513 in the year-ago period. Core operating profits came at Rs 15,131.8 crore, up 18.24% YoY and 4.1% Q-o-Q.

HDFC Bank’s net interest income (NII) plus other incomes increased by 14.7% to Rs 25,085.2 crore. GNPAs were at 1.35% of gross advances as on September 30, 2021, as against 1.47% as on June 30, 2021.

Provisions came down 18.8% at Rs 3924.7 crore. The bank’s loans grew 15.5% from a year ago, about three times the banking sector’s rate.

Federal Bank: Private sector lender reported a near 50% jump in net profit for the September quarter on lower provisions and improvement in asset quality even as its total income shrunk.

The net profit stood at Rs 460 crore compared with Rs 308 crore in the year-ago period. Total income fell about 3 per cent at Rs 3,824 crore from Rs 3,937 crore.

Operating profit fell by about 9% at Rs 865 crore from Rs 947 crore over the same period. However, a 54% lower provisions at Rs 245 crore helped the net profit surge.

YES Bank: The bank today reported a 74.3% y-o-y growth in net profit to Rs 225 crore for the said quarter against analysts’ expectations of a Rs 31 crore net loss.

Weekly Market wrap up: Know how banks, financials performed this week

The NII fell 23.4% y-o-y to Rs 1,512 crore. The healthy bottomline performance of the lender was thanks to a sharp decline in provisions. YES Bank’s provisions for bad loans declined 65% to Rs 377 crore.

GNPAs ratio fell to 15% from 15.6% in the previous quarter. Similarly, net NPA ratio came in at 5.5% as against 5.8% in the previous quarter.

Bank of Maharashtra: Net profit jumps 103 % to Rs 264 cr. The bank’s recovery from written-off accounts stood at Rs 340 crore, including Rs 258 from the DHFL resolution. Net interest margin (NIM) improved to 3.27%, GNPA declined 5.56% and Provision coverage ratio improved to 92.38%.

Banks’ recovery and up-gradation stood at Rs 645 crore from Rs 556 crore last year around the same time.

IDBI Bank: The bank on Thursday reported a 75% jump in net profit to Rs 567 crore from Rs 324 crore in the same period of the last fiscal. The NII grew 9% to Rs 1,854 crore, NIM improved to 3.02%, compared to 2.70% in the second quarter last fiscal.

Bank’s GNPAs declined to 20.92% against 25.08% a year ago. Net NPAs improved 1.62% from 2.67%. Provisions for bad loans and contingencies also rose to Rs 434 crore.

Weekly Market wrap up: Know how banks, financials performed this week

HDFC Life Insurance: The life insurer on Friday announced a 15.9% fall in its consolidated net profit to Rs 274.16 crore in Jul-Sep, as against Rs 326.09 crore a year ago.

Total income, however, rose to Rs 20,478 crore against Rs 16,426 crore a year ago, while the net premium income increased by 52% to Rs 11,445 crore from Rs 10,056 crore, the insurer said in a regulatory filing.

Value of new business (VNB) recorded a robust 30% growth to Rs 1,086 crore over last year. Profit after tax on the other hand stood at Rs 577 crore for H1, 26% lower than H1 FY21.

LIC Housing Finance: Net profit for the said quarter fell 69% at Rs 248 crore as compared with Rs 791 crore in the year-ago period. NIM for the quarter dipped to 2 per cent as against 2.20% in the June quarter.

The company’s total income for the quarter was lower at Rs 4,715 crore as compared to Rs 4,982 crore during the year-ago period. The NII was Rs 1,173 crore as against Rs 1,238 crore.

Its total loan portfolio stood at Rs 2.38 lakh crore registering an 1% y-o-y growth. During the quarter, total disbursements grew 29%. Retail home loan disbursements grew 38%.

Weekly Market wrap up: Know how banks, financials performed this week

L&T Finance Holdings: The company on Wednesday reported a 10% decline in its consolidated net profit to Rs 223 crore. Total income fell to Rs 3,134.46 crore as against Rs 3,508.91 crore during the year-ago period.

Rural finance business saw the highest-ever Q2 disbursement at Rs 4,987 crore, a jump of 51% quarter-on-quarter. The total disbursements in the quarter stood at Rs 7,339 crore.

GNPAs stood at 5.74% during the quarter, amounting to Rs 4,796 crore. Debt-to-equity ratio stood at 4.40 in Q2FY22. Capital adequacy improved to 25.16%.



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2 Midcap Stocks To Buy According To Motilal Oswal For Up To 30% Gains

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L&T Finance Holdings: Buy with a price target of Rs 110

The brokerage has placed a buy call on the stock of L&T Finance Holdings, with a price target of Rs 110 on the stock, which implies gains of nearly 30% from current levels of Rs 84.

According to the brokerage L&T Finance Holdings is near the bottom in terms of consolidation of its loan book and should start exhibiting loan growth in 2HFY22. NPA recognition of a large Real Estate account will remove an overhang of potential asset quality stress and allow L&T Finance Holdings to work towards its resolution. We are now factoring in a 7%/11% loan growth in FY23E/FY24E and have upgraded our FY23-24E EPS estimate by 6-9%. We maintain our Buy rating with a target price of Rs 110 per share (1.2x Sep 23E consolidated book value per share),” the brokerage has said.

L&T Finance Holdings: Strong Disbursements

L&T Finance Holdings: Strong Disbursements

Disbursements of the company increased by 3% YoY (up 40% QoQ on a low base) to Rs 73.4 billion, led by Rural Finance, which constitutes 68% of total disbursements.

“Despite both the Tractor and 2W industries declining by 11-12% YoY, L&T Finance Holdings maintained its market share and delivered the highest ever 2Q disbursements in both segments. The MFI segment saw a sharp recovery in disbursements in Sep’21, with a focus on existing customers,” the brokerage has said.

Buy LIC Housing Finance stock

Buy LIC Housing Finance stock

Motilal Oswal Institutional Equities has a buy call on the stock of LIC Housing Finance. According to the brokerage, the firm has completed a preferential allotment of equity to its promoter LIC in 2QFY22, after an independent third-party valuation.

“Despite a QoQ improvement in asset quality, credit costs were elevated, driven by an improvement in Stage 3 PCR. While ~33% of the Wholesale book has been restructured, it will be interesting to understand Stage 3 trends in the Developer book and whether there have been any new slippages/resolutions on that front. Margin has bottomed out and should improve, barring any one-off impacts on interest income. We will look to revise our estimates post the earnings call on 22nd Oct’21,” the brokerage has said.

Disclaimer

Disclaimer

The above stocks are picked from the brokerage report of Motilal Oswal. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.



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Investors’ wealth erodes by Rs 10.29 lakh crore in 4 days, BFSI News, ET BFSI

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NEW DELHI: Investors have lost over Rs 10.29 lakh crore in four days of market decline, with risk appetite dented by concerns over frothy valuations amid unabated selling by FIIs.

Falling for the fourth consecutive session on Friday, the 30-share BSE benchmark sensex settled 101.88 points or 0.17 per cent lower at 60,821.62.

In four days, the benchmark has tumbled 943.97 points or 1.52 per cent.

Following this, the market capitalisation of BSE-listed companies tumbled by Rs 10,29,970.84 crore in four days to stand at Rs 2,64,39,636.09 crore at close of trade on Friday.

“Equity markets opened positive but after initial range-bound move, again succumbed to profit-booking and ended the session in the red for the fourth day in a row,” said Siddhartha Khemka, Head – Retail Research, Motilal Oswal Financial Services Ltd.

ITC was the biggest laggard among the 30 sensex companies, falling 3.39 per cent, followed by Maruti, Infosys and NTPC.

In contrast, HDFC, Bajaj Auto, Kotak Bank, Axis Bank and IndusInd Bank were among the gainers.

In the broader market, the BSE midcap and smallcap indices declined up to 1.20 per cent.



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How China Evergrande’s debt troubles pose a systemic risk, BFSI News, ET BFSI

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HONG KONG: China Evergrande Group has supplied funds to pay interest on a dollar bond, a person with direct knowledge of the matter told Reuters on Friday, days before a deadline that would have seen the developer plunge into formal default.

News of the remittance will likely bring relief to investors and regulators worried about a default’s wider fallout in global markets, adding to reassurance from Chinese officials who have said creditors’ interests would be protected.

WHAT IS EVERGRANDE?

Chairman Hui Ka Yan founded Evergrande in Guangzhou in 1996. It is China’s second-largest property developer, with $110 billion in sales last year, $355 billion in assets and more than 1,300 developments nationwide. It listed in Hong Kong in 2009.

Evergrande grew rapidly through a loan-supported land-buying spree and selling apartments quickly at low margins. It employed 163,119 staff as of June-end, its interim report showed.

Slowing growth has seen it branch into businesses such as insurance, bottled water, soccer and electric vehicles (EVs).

HOW DID CONCERNS ARISE OVER DEBT?

In September last year, a leaked letter showed Evergrande pleading for government support to approve a now-dropped backdoor stock market listing. Sources told Reuters the letter was authentic; Evergrande called it fake.

In June, Evergrande said it did not pay some commercial paper on time, and in July a court froze a $20 million bank deposit held by the firm at the bank’s request.

The firm in late August said construction at some of its developments had halted due to missed payments to contractors and suppliers. It sought repayment extension for a trust loan in early September, sources told Reuters, and media reports said Evergrande would suspend interest payments due on loans to two banks that month.

Liabilities, including payables, totalled 1.97 trillion yuan ($306 billion) at end-June – equivalent to 2% of China’s gross domestic product.

HOW HAS EVERGRANDE REDUCED DEBT?

Evergrande accelerated efforts to cut debt last year after regulators introduced caps on three debt ratios, dubbed the “three red lines”. It has been aiming to meet those requirements by the end of 2022.

It offered steep discounts on residential developments to spur sales and sold the bulk of its commercial properties. Since the second half of 2020, it has had a $555 million secondary share sale and raised $1.8 billion by listing its property management unit, while its EV unit told a $3.4 billion stake.

On September 14, it said asset and equity disposal plans had failed to make material progress.

WHAT’S THE RISK?

China’s central bank said in 2018 companies including Evergrande might pose systemic risk to China’s financial system.

The firm’s liabilities involved as many as 128 banks and over 121 non-banking institutions, the leaked letter showed.

Late repayments could trigger cross-defaults as many financial institutions are exposed via direct loans and indirect holdings through different financial instruments.

OPERATIONS OUTSIDE MAINLAND CHINA?

In Hong Kong, Evergrande owns an office tower and residential development as well as two nearly completed residential developments, plus a vast undeveloped land parcel.

It has spent billions of dollars acquiring stakes in automobile technology developers, including Sweden’s NEVS, the Netherlands’ e-Traction and Britain’s Protean. It also has joint ventures with Germany’s Hofer and Sweden’s Koenigsegg.

WHAT DO REGULATORS SAY ABOUT EVERGRANDE, PROPERTY?

In comments reported by state media Xinhua and echoing words from the central bank, Vice Premier Liu He told a Beijing forum on Wednesday that the risks were controllable and that reasonable capital demand from property firms was being met.

The chairman of China’s securities regulator, Yi Huiman, said the authorities would properly handle the default risks and look to curb excessive debt more broadly.

Central bank Governor Yi Gang said on Sunday the world’s second-largest economy is “doing well” but faces challenges such as default risks for certain firms due to “mismanagement.”

Yi said China will fully respect and protect the legal rights of Evergrande’s creditors and asset owners, in line with “repayment priorities” laid out by China’s laws.

WHAT’S NEXT FOR EVERGRANDE?

Evergrande remitted $83.5 million to a trustee account at Citibank on Thursday, the source told Reuters, allowing it to pay all bondholders before the payment grace period ends on Saturday.

Still, the developer will need to make payments on a string of other bonds, with the next major deadline to avoid default only a week away and little known about whether it is in a position to pay those debts.

Evergrande missed coupon payments totalling nearly $280 million on its dollar bonds on September 23, September 29 and October 11, beginning 30-day grace periods for each.

After a grace period ends, non-payment would result in formal default and trigger cross-default provisions for its other dollar bonds. Evergrande’s next payment deadline is Oct. 29, with the expiration of the 30-day grace period on its Sept. 29 coupon.



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Will the lender report another quarter of blockbuster earnings?, BFSI News, ET BFSI

Banking & Finance

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MUMBAI: ICICI Bank is expected to have another quarter of strong earnings performance aided by its cards and retail lending operations.

The private sector lender is likely to report a 19.7 per cent year-on-year growth in net profit to Rs 5,086.7 crore for the quarter ended September. The bank is expected to report a 20 per cent on-year rise in net interest income to Rs 11,227 crore for the reported quarter.

ICICI Bank will report its September quarter earnings on Saturday.

The lender’s provisions in the quarter are expected to decline on a sequential basis, although, they will increase on a year-on-year basis. Analysts suggested that the bank could dip into its COVID-19 provisions created in prior quarters to accommodate a likely increase in slippages in the quarter.

“We are building slippages of 2.1% (Rs 4,000 crore) but we see a solid commentary on recovery to normalized levels of their loan book from an asset quality perspective,” said brokerage firm Kotak Institutional Equities.

On the lending front, brokerage firm Sharekhan expects the bank to report a 20 per cent year-on-year growth in loans during the quarter. The growth is likely to be led by the company’s retail loans operations and credit cards business.

ICICI Bank’s operating performance will continue the recent strength as analysts see a 13.6-14.8 per cent year-on-year growth in pre-provision operating profit for the lender in the reported quarter. The net interest margin is also expected to remain stable at 3.8-3.9 per cent.

Besides the earnings, investors will keenly await the management’s commentary on the lending business, especially, in the backdrop of a robust economic recovery post the second wave of the pandemic.



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