Banks across the board got a full reprieve in Q1 (Fy 2014) as they report much better NIMs, ING improving to 3.56% up almost 10% from previous year scores because of the lower interest rates by the Central Bank. Apart from the old hat CEntral bank rebuttal to banks at this stage for refusing to pss along the rate cuts, this strategy is not really creating any abnormal returns but would have unsqueezed banks bt for the oil triage getting the Economy back into a high rate orbit.
Also the concerns about asset quality are probably unfounded as they just try to close up books on all doubtful assets and this quarter’s anomalous jump of 50% at HDFC Bank and more at ING vysya is likely just a result of that
Retail Banks have obviously been running higher NIMS like 4.4% at HDfc bank and cllose to 4% at Axis, but they also hide a lot of retail pain in their bigger balance sheets that can be shown by segmenting the cost of funding also appropriately for the retail book
Reproduced from yesterday’s morning report – sanitised and debugged
Mr Pranab Mukherjee can possibly land a 75% vote in the Presidential election later in the week as Mamata Bannerjee capitulates for a fellow Bengali. Early monsoon worries caused a big hole in the states of UP, Punjab, Maharashtra and even Rajasthan with more than 50% deficiency but Foodgrain production is already 257.44MT for the year ending June if government estimates are believed with Record production in Rice(104MT) , Wheat (93MT), cotton and sugarcane keeping prices down in the meantime. this last estimate has been revised upward by 5MT from April.
However Nifty’s rangebound worries have initiated more correction calls and already stopped out some shorts at 5200 where it lies in wait, as the most undervalued emerging market and also as the fastest growing Coke market where Coke and Sprite both grew by more than 30% The MF reforms are going to come in with commissions restored but the usual halfway house on the bridge of expectations draws a line in the sand for what uptick you will get from further policy pronouncements. The macro Indian story has to celebrate but next year is going to see contraction in agri production with Sowing in crops down from 10-30%. Even in hot commodities like sugar and cotton, the downtick is there though just 2-4%(in sowing)
India is still 15 points ahead of China in the Nielsen consumer confidence. However IMF seems to have given it the thumbs down despite keeping growth estimates north of 6% with India’s Fisc targeting a number the same as Ireland and higher than Spain , vying for the 8.9% mark in 2012 behind Japan’s tsunami restructuring funding and not likely to improve in 2013 either , making mockery of india’s budget estimates brazenly, giving Moody’s and S&P fodder as they are set to evaluate the india rating in the next 8 weeks. Guar seed is the only commodity doing well though the shutting of the Straits of Hormuz mean Oil could march ahead again. India’s trade deficit data for June found Oil buying missing ahead of a probably ban on Gold imports to $10B from $16 B in the month of May
Bajaj Auto reports today and Hero Motocorp follows tomorrow while non discretionary consumer companies ares showing health in Sales and in marketing spends at 12.9% for Marico
Dr Reddys and HT Media report this week with JP Power closing out on the weekend with Q2 numbers. JP Infra is poised to report the Yamuna expy opening as well. Monday opens to expectations of good results from Colgate and HUL. TV18 also reports on Monday followed by the Pizza guys and Dominos franchise holder Jubilant Foods on Wednesday when the IT saga unwinds with par for the course HCL Tech results
Smaller banks Karnataka Bank and Bank of Maharashtra report this week then ING, Canara, LIC Housing and SBBJ set the stage for the big Yes BANK reports on Wednesday (24th). Kotak Mahindra Bank reports tomorrow.
The instinct is to laud the report card but the chink in financing is obvious and yields are already moving up in a bid to force a rate cut this tim ebyu april. . yield now at 8.41 % Bonds could be a great investment if youy were sure of a peak but I am sure investors have started buying again in small quantities.
Tax revenue increases are fair, the subsidy bill seems to be an adhoc set of assumptions currently with no reform in sight and diesel pricing or any other real decisions not taken and not likely to be taken in which case yields could continue rising for some more time before important investments are made in the bond market.
Got a thumbs down from Moody’s but indian banks back thenew deficit target ewwww1
india finally received an investment grade rating in short term debt instruments at P-3 even as the $310 bln in corporate exposure to international debt now includes more than 40-50% on short term obligations, now easy to roll over int he origibnal market as an investment grade security
After a season of low profits from correctional provisioning, this quarter’s growth in provisions to INR 29.2 bln
(21.6 bln Sep 10) or $0.55 bln was more easily absorbed as NII from loans jumped to INR 104 bln or $2.06 bln at the new extreme dollar rates. 22% jump on the Gross NPAs and 46% on Net NPAs being still a pressure on growth. Last year in September they had scored 81.14 bln in NII and Net NPAs were still high because of the bank’s customer profile at 1.70%, the growth to 2.04% in line with the sector’s results
The Credit Deposit (Advance / Deposit Ratio) ratio is up to 75.6% from below 75% while Deposits are more than $200 bln at INR 9.73 tln Provisions for 6 months including the counter cyclical buffer till Q1 are as high as the quarter’s NII at INR 103 bln
Thus the PaT is a good INR 2810 Crs or $560 mln a growth in double digits over last year September. Now SBI has stepped into a negative spiral of sentiment on the sector Moody’s choosing this time to derate the Indian banking sector even though it is insulated from global harakiri in the sector (apparently as indian corporate encourage limited ratings business) The sectoral rating by Moody’s as the downgrade on the Standalone Financial Strength rating to D+ earlier do not affect any credit offerings of the banks, incl PSU ECBs and Infra Bonds by the InfraCos
The market could have expected a 30% grow back in profits but that does seem unlikely from here Fee Income is apparently flat from last year as expected. According to reports, NPAs start climbing down in the second half of the year as Pratip Chaudhary had recommended / guided since the wipeout in March 2011 Grodss NPAs at 4% however mean the bank will be held to close scrutiny from here
A loan growth of 15% on its loan book of INR 8 tln means a significant fold on its own size of the bank esp as CASA keeps pace and Deposits grow faster ahead of the rate deregulation this quarter
A loan growth of 15% on its loan book of INR 8 tln means a significant fold on its own size of the bank esp as CASA keeps pace and Deposits grow faster ahead of the rate deregulation this quarter Loan Demand has seen improvement in the festive season and continues in November. SME loans continue to grow higher at 20.7%. Iron & steel , Metals and Mining and Textiles continue to be the largest NPA creators
Basel 1/2 CAR for the bank is already down to 11% compared to 16% for othrers, while CASA remains good at 47.6% Restructuring was 1100 crs or INR 11 bln and slippages (new) 5.06 bln Gross NPAs have improved to 1.95% from over 2% in last year Q2. The PCR is over 63.6%