Indian Banks

ICICI Bank, the country’s largest private sector lender, on Thursday said its consolidated net profit fell 26.36 per cent to Rs 1,148.66 crore during the quarter ended December 2009, largely due to a loss on the treasury portfolio.

The bank’s consolidated total income declined by 16.23 crore to Rs 14,176.84 crore.

On a standalone basis, ICICI Bank’s net profit fell 13.45 per cent to Rs 1,101 crore during the quarter as other income fell.

While the bank’s net interest income rose 3.42 per cent to Rs 2,058 crore, other income fell over 33 per cent to Rs 1,673 crore. And, if the Rs 203 crore generated from sale of its stake in the point-of-sale terminal business is taken away, the decline in other income comes to 41.53 per cent.

The decline in other income was mainly the result of a Rs 26-crore hit on its treasury portfolio as against a Rs 976-crore gain in the corresponding period last year. Fee income rose 5.57 per cent to Rs 1,422 crore during the quarter ended December 2009.

Compared to the other banks, including those in the private sector, net interest income (NII) growth was muted as the bank continued to shrink its loan book. Outstanding advances fell 15.65 per cent to Rs 1,79,269 crore as the private sector lender continued to stay away from a large number of retail segments, which were the mainstay of its earlier growth strategy. ICICI Bank also reduced deposit base by 5.5 per cent to Rs 1,97,653 crore as part of its strategy to retire high-cost funds.

Due to falling cost of funds and an increase in low-cost deposits, net interest margin improved to 2.6 per cent at the end of the December from 2.4 per cent in end-September. The bank’s management said NIM from domestic operations was around 3 per cent.

On the liabilities side, current and savings account (Casa) deposits, the main source of low-cost funds, registered an increase of Rs 5,550 crore during October-December, representing 36 per cent growth over the comparable period in 2008. At the end of December 2009, Casa accounted for 39.6 per cent of the bank’s total deposits.

Apart from Casa, the other good news was decline in the stock of gross non-performing assets, which fell 0.7 per cent to Rs 8,926 crore. As a result, non-tax provisions fell 0.55 per cent to Rs 1,002 crore.

However, with total stock of advances declining, the proportion of gross bad debt increased by 70 basis points to 4.84 per cent between December 2008 and December 2009. Net NPAs were estimated to have increased to 2.43 per cent of net advances from 2.07 per cent a year ago.

ICICI Bank shares rose after the results were announced. But the closed marginally up at Rs 853.35, 2.71 per cent lower than yesterday’s closing price on the Bombay Stock Exchange.

Popularity: 4% [?]

Backed by robust growth margin and fee-based income, Kotak Mahindra Bank on Thursday reported a 153 per cent rise in consolidated net profit at Rs 331.4 crore for the quarter ended December 2009 compared to Rs 130.9 crore a year age.

Consolidated total income for the quarter went up by 42.87 per cent to Rs 2,407.13 crore from Rs 1,684.74 crore in October-December 2008.

The private bank reported an improvement in net interest margin to 6.3 per cent for the December quarter from 5.9 per cent a year ago.

Other income also grew at a fast clip, partly reflecting the increase in fee-based revenues from corporate clients. For the group, fees and brokerage rose 119.2 per cent to Rs 1,222.43 crore in the quarter-ended December 2009.

What helped the bank’s bottom line was an improved performance by its subsidiaries whose businesses are aligned to the stock markets.

On standalone basis, during the third quarter, Kotak Mahindra Bank’s net profit doubled to Rs 142 crore from Rs 71 crore during October-December 2008.

The net interest income of the standalone entity rose 27 per cent to Rs 487 crore from Rs 383 crore, said Jaimin Bhatt, its group chief financial officer.

Bhatt said the cost of funds declined to around 5 per cent at end of December 2009 from 7-7.5 per cent a year ago. The share of low-cost current account and savings back account deposits in total deposits was estimated at 28 per cent.

The increase in auto, home loans and corporate credit helped to clock 23 per cent growth in consolidated advances to Rs 29,337 crore as against Rs 23,865 crore as on December 31, 2008.

Bhatt said the share of corporate credit has grown to 31 per cent and Kotak Mahindra Bank intended to maintain the share of corporate segment at one third in the total credit book.

Total assets managed or advised by the Kotak Mahindra Group as on December 31, 2009, was Rs 52,610 crore.

On a consolidated basis, the gross non-performing assets (NPAs) were estimated at Rs 1,108.48 crore (3.71 per cent of advances) at end of December 2009, as against Rs 865.63 crore (3.58 per cent) a year ago. In absolute terms, the increase was 28 per cent.

The net NPAs were Rs 572.54 crore (1.95 per cent) compared to Rs 561.41 crore (2.35 per cent). The incremental addition to NPAs had been less and there was improvement in repayment behaviour, Bhatt added.

The consolidated capital adequacy ratio was 20.5 per cent. For the standalone entity it was 17.01 per cent.

(BS)

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If you think your money in savings bank account will be automatically converted into fixed deposits (FDs), think again. It may just happen that while you are thinking the idle cash may earn 6-6.5 per cent a year, the prevailing fixed-deposit rate for one-year funds, it may actually continue to fetch only 3.5 per cent.

That is because banks are discouraging auto sweeps, fearing erosion in low-cost deposit base in the wake of rising interest rate expectation. The savings and current account deposits (Casa) or low-cost deposits, help banks keep their cost of funds under check, and, in turn, ensure healthy margins.

Though banks have not withdrawn the product, they are not pushing it aggressively either.

“We still have the product, but we are not aggressively pushing it,” said a senior executive of Axis Bank.

Axis Bank has one of the highest Casa component in total deposits, estimated at 45 per cent at the end of December 2009 as against 39 per cent a year ago. The bank executive said the lender would like to maintain Casa at 40 per cent at all times. In the third quarter, the bank’s Casa growth was 29 per cent on year, while total deposit grew 7 per cent, mainly due to slower growth in term deposits, he added.

Interest on deposits in savings accounts is the only regulated interest rate, fixed at 3.5 per cent, and no interest rate is paid on current account balances. The Reserve Bank of India (RBI), in its annual policy announcement in April, mandated the banks to calculate interest rate on savings accounts on a daily basis. Earlier banks paid interest on savings accounts for the last 10 days of a month.

Some of the public sector banks are also increasingly avoiding transfer of low-cost deposits to fixed deposits.

“Earlier, banks used to switch savings bank deposits into fixed deposits of six-month tenure, as the differential between the rates was a mere 25 basis points, or at best 50 basis points. Now, as the gap has widened, we are not aggressively canvassing the scheme, though we still have the product,” said a senior Indian Overseas Bank executive.

The public sector banks have one more reason not to auto transfer funds to fixed deposits, as the government has given them Casa targets and not the total deposit target for 2009-10. Earlier, banks only had to indicate their growth projects for deposits, along with other parameters in their statement of intent.

As a result, most of the public sector banks have stressed on Casa this year, and most have seen growth in line with their projection, at least till the end of the first half of the financial year. Now, with interest rates expected to harden, such transfer will dent bank’s profitability, which is already under pressure due to lack of credit growth and vanishing treasury income.

Some of the banks also said though the strategy of discouraging auto transfer might be successful in urban centres where customers are aware of various investment avenues, but for smaller centres, the model may not be successful.

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State-run Punjab & Sind Bank (PSB) has decided to float its initial public offer (IPO) in June, as it seeks to raise Rs 500 crore from the public. It is likely to infuse another Rs 700 crore to fund its expansion plans till 2014-15.

The lender is targeting to achieve Rs 1 lakh crore of business by March 2011. It hopes to make a profit of Rs 500 crore this year.

In an interview with Business Standard, PSB Chairman and Managing Director GS Vedi said the bank had written to the department of financial services seeking clearance for the initial offer. The department has asked for some details and PSB was in the process of responding to it.

“We want to offer 40 million shares in the market with face value of Rs 10 each. We expect some premium on this price. So, we will raise about Rs 500 crore. There will be a dilution of 82-83 per cent equity, which will bring down the government stake to 82-83 per cent,” Vedi said.

The lender has sought recapitalisation support of Rs 700 crore from the government. If granted, this would take its total available capital to Rs 1,200 crore, which would be sufficient to meet the bank’s capital expansion requirements for the next four to five years.

“We got Rs 500 crore from the government five years ago, and since then, we have been on our own. More capital will help the bank in accelerating the pace of growth. It will be required for meeting the Basel-II norms, operational risks, additional wage payment and IT initiatives,” he said.

PSB will file its draft red herring prospectus with markets regulator Securities & Exchange Board of India in April.

“We are waiting for our March figures,” Vedi said. “At the moment, it will be only a public issue. We will think of a private placement later,” he said.

(BS)

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Competition watchdog CCI has asked about two dozen banks and housing finance companies , including HDFC, ICICI Bank, and LICHF, to explain their imposing penalty on borrowers for prepayment of home loans.
The commission, according to official sources, has sent notices to major home loan players after examining a report of director-general (investigations) which found evidence against banks for misusing their dominant position and entering into anti-competitive agreements.
We have sent showcause notices to 20 banks, including ICICI Bank, HDFC, LIC Housing Finance, Deutsche Postbank, and the Indian Banks Association. We have also sensitised RBI on how the practice of charging pre-payment penalty is hurting consumers, a senior CCI official said. The commission was scrutinising a complaint filed by a customer against the practice by these banks.
However, spokespersons of ICICI Bank, HDFC and LIC Housing Finance could not be reached for comments. The move gives hopes to thousands of borrowers of foreclosing their housing loans without paying penalty. If the penalty is lifted , it may also lead to borrowers shifting their credit to those lenders offering lower interest.
The CCI, official said, could also penalise the lenders for adopting such practices to discourage customers from pre-paying home loans or the the practice could be banned across the industry. Market leader HDFC, for example, currently levies pre-payment charges ranging between 0% and 2% of the amount prepaid by a borrower.
The pre-payment penalties are imposed to discourage customers from retiring their debts before the scheduled date. Some lenders charge only if the customer seeks refinancing the loan by taking money at a lower rate from some other entity.
Housing Loan outstanding at the end of March 2009, rose to Rs 2,63,235 crore, compared to Rs 2,52,932 crore at the end of 2007-08 .

(Times of India)

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Spurred by good growth in home loan disbursals, the country’s largest mortgage financier HDFC reported a 23 per cent rise in net profit to Rs 671 crore in the December 2009 quarter from Rs 546 crore in the year-ago period.

Although total income fell 6 per cent to Rs 2,762 crore, the bottom line was pushed up by a Rs 52-crore profit on sale of investments against a loss of Rs 0.35 crore in the year-ago period.

The lender also managed to put a squeeze on interest costs, which fell 17 per cent to Rs 1,704 crore from Rs 2,042 crore in the corresponding quarter last year. As a result, total expenditure fell 16 per cent to Rs 1,805 crore from Rs 2,143 crore in the quarter ended December 31, 2008.

Lower cost of funds also helped push the net interest margin up from 4.19 per cent to 4.25 per cent a year ago.

Reflecting the strong demand for home loans, approvals during the third quarter grew by 31 per cent to Rs 12,692 crore compared to Rs 9,640 crore in the year-ago quarter.

Over the same period, disbursals grew 18.6 per cent to Rs 11,185 crore. In the previous quarter, growth in disbursements had nearly touched 30 per cent, fuelled by a pent-up demand for home loans.

Retail loans to individuals grew 9 per cent compared to the September 2009 quarter and made up 70 per cent of the HDFC’s loan book as of December 31, 2009.

“We should see around 20 per cent loan growth for the whole year,” said Keki Mistry, vice-chairman and chief executive officer of HDFC.

After initially dismissing fixed-cum-floating rate products as a marketing gimmick, the lender introduced this scheme in December last year. The financier hopes to disburse Rs 3,500-4,000 crore of loans under this scheme in January. “Our margins will not be affected by this scheme since our cost of funds for the first two years is 6.1 per cent. So we will be able to maintain a spread of 2.2 per cent,” said Mistry.

The mortgage financier’s gross non-performing assets as a percentage of total advances fell to 0.94 per cent from 1.01 per cent in the December 2008 quarter. Its capital adequacy ratio, which is capital as a percentage of total risk-weighted assets, was 14.8 per cent as of December 31, 2009.

The lender’s share price rose 0.55 per cent on the Bombay Stock Exchange to end the day at Rs 2,524.1.

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Despite a sharp fall in treasury income compared to the year-ago quarter, private sector lender Yes Bank recorded a 19 per cent growth in net profit to Rs 125 crore for the quarter ended December 31, 2009.

The bank’s net interest income, or the difference between interest earned and interest paid, grew 70 per cent to Rs 211 crore. Non-interest income fell 33 per cent to Rs 128 crore, mainly due to a sharp fall in treasury income to Rs 28 crore, from Rs 148 crore in the December 2008 quarter.

Net interest margin, that is, the difference between the rate at which a bank lends and the rate at which it raises funds, rose 3.1 per cent from 2.8 per cent. This was mainly due to a 300 basis points fall in cost of funds from 9.6 per cent to 6.6 per cent.

Cheaper funds helped offset the sharp fall in yields on advances from 13.7 per cent for the quarter ended December 31, 2008, to 10.3 per cent.

The bank’s gross non-performing assets (NPAs) were 0.29 per cent of the total loans while net NPAs were 0.09 per cent as of December 31, 2009.

The bank’s capital adequacy ratio as of December 31, 2009, was 16.2 per cent, with Tier-1 capital at 9 per cent.

The bank recently closed a Rs 300-crore issue of lower Tier-II bonds. It plans to raise $150-200 million through a qualified institutional placement of equity and Rs 75-85 crore through a hybrid Tier-1 issue.

The bank’s stock fell 3.98 per cent on the Bombay Stock Exchange to end the day at Rs 272.65 per share.

(BS)

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State Bank of India (SBI), which had lowered its loan growth target in the current financial year on account of low credit offtake, on Wednesday said credit growth in 2010-11 was likely to improve to around 20 per cent.

“This year, it may close at 18 per cent. Credit growth is picking up…It may rise to around 20 per cent next year,” SBI Chairman OP Bhatt told reporters on the sidelines of a conference here.

The Reserve Bank has a loan growth forecast of 18 per cent for Indian banks in 2009-10. Referring to the banks’ demand to lower the savings bank deposit rates or to maintain status quo, the SBI Chairman said rates of savings account deposits should be lowered to contain the cost of funds of banks.

Banks fear their cost of funds will go up when they start computing the savings deposits rates post-April, as directed by the Reserve Bank of India. The central bank may marginally hike the cash reserve ratio, the percentage of funds banks have to park with the central bank, marginally, at its quarterly policy late this month to suck out excess liquidity from the system, he said.

Bank lending rates were likely to remain stable in the near future, Bhatt said.

(BS)

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