India Morning Report: The Morning after and the rush to October expiry, pre Diwali

Maruti Suzuki - A Star - Reflection
Maruti Suzuki – A Star – Reflection (Photo credit: Balaji.B)

 

Banks get a further fillip after a great policy picnic yesterday as the 7day and 14day repo allowances of 1% of NDTL rev up Balance sheets and as Chanda Kochchar explained, large projects will stay away for the extended holidays that is Q3 of the Fiscal till December and retail lending will be in high fashion, ensuring a good economic fillip to non investment GDP growth and due dimensions of a recovery with a good monsoon

 

This edition of the Morning report is late because of an exceptionally busy earnings week ( though technically i was engaged in an all-nighter on one of the better games out there)  The easy availability of government collateral apart, the Indian Banking system also enjoys, despite its overt concentration on NBFC and Real Estate Loans a still largely unsaturated map of loan portfolios with both these stakeholders whose importance cannot be underestimated in the growth cycle.

 

LIC Housing results were a great start to the rest of the week with INR 22 Bln in Topline and INr 3 Bln in Net Profits, boosting the missed Net Interest Income with other income and  as usual one of the first with their wholesale bank funding tied up. Big brother for NBFCs, Deepak Parekh led IDFC reports tomorrow while Auto scrips like Bajaj Auto and Maruti ( i do not know why) are in front of the rally that survives. Given the market predilection for selecting concentrated risk after choosing winners from a diverse basket, 6250 is already looking stressed if only in the bullish premium of the series futures being lose in the run today with merely 40 points chalked up on the Nifty,..

 

However as of now there was enough with bank stocks having come back from out of favor and apart from YES and the bigger ICICI Bank, HDFC Bank and Axis Bank, the others, especially the badly run PS Banks with near 5% of NPAs on the Balance sheets must start receding and winners again return to glory for a move further in the same run. IT will probably return to extra attention to allow funding that leg of the rally if there is one. Pharma stocks have been up as good results pour in from challenged players like Ranbaxy and high expectations from DRL keeping away from interest in the real winners in the midcap sector

 

Bharti grew more than 5% sequentially and EBITDA margins grew 1.2% on year to 32% though a one time forex loss impacted the bottomline. Markets were quicker to shrug off the net profit miss as the Africa business , late to the party reported a 18% sequential jump to INR 70 Bln revenues, Dollar value of the Business also climbng to $1.11 Bln. Mobile Data, finally seemed to have taken off for Airtel and while India markets revenues dropped the exected  dimes to an ARPU of 192, Africa more than made up as the company wh $9.7Bln in debt had hoped. The Forex cost hit Financing expense which jumped 38% sequentially. Also Revenue per minute in voice finally grew to 36.74 p from 36.39 p in June. Growth was 13% on year in the topline

 

DLF is hurting from the pre festive season but with the continuing woes sequential growth is for Q3 is down here as well still expected to be near 10% on year in Revenue and EBITDA terms , EBITDA margins have grown to near 39% for this quarter too ( estimates from ET/Moneycontrol)

 

The currency and bond markets are still subdued though they have responded positively to the policy’s tone of finality for the direction for India Inc, open options not sunting corporate strategy into a crucial business season

 

Good returns with pricing advantage for Consumer companies and fuel decontrol cannot and will not risk the India growth story, nor is Indian currency going to be compared with the likes of Brazil, Turkey and Russia at any stage despite our structural ‘diversity’ and the unsaid inclusion worries as with other more developed democracies like the USA. PIMCO leads the return of the non ETF institutional Investors to the India story as the kitty for October inflows continues to grow ahead of tomorrows expiry which could still happen into the 6350 mark and definitely should close at 6300 as rollovers complete within yesterday today and tomorrow. Maruti should ideally return to more reasonable valuations and attention shift to M&M Bajaj and even Herocorp

 

 

 

Bank Results season (India Earnings): ICICI Bank keeps showing long term tracking to objectives – Q2 FY2014

Your favourite bank did start showing  hidden wrinkles as it eagerly snapped up a 26 bp NIM increase to 3.26% this quarter an Net interest income grew in line with the bank’s voracious appetite to INR 38.88 Bln. The retail surge which slowed down to 20% and Deposit growth continues without buyouts of deposits  at the industry rate of 14%. That means the retail team is unlikely to prove other results without the earlier snafus with retail processes even as it opened 250 new branches, 150 in the unbanked regions. The chink in the armor is that the bank will smooth over its increasing gross NPAs as the continuing expansion in margins gets the bank to override and lay down the news of a jump in gross and net NPAs. Gross NPAs for a large bank as such are horribly disavowable at 3.23% and Net NPAs are also thrice the rate at equally sized HDFC Bank.

The stresses however may not be l

India decadal growth rate map en
India decadal growth rate map en (Photo credit: Wikipedia)

inked to its growth as one looks askance at the 15% plus ROE. At this moment however I am unable to more than cast a  doubt on the Capital Structure for such ROEs and the same however is not to be confused with the global banks which still have a entirely different Order of magnitude of liquidity and derivative profits/risk management. It might still have an audience requesting that they be treated as peers especially on the comments on Capital Structure while structured product profits would still seem unseemly. The results will probably bring the bank under fire from its Indian peers , starting here at the ROE growth which seems awkwardly as always one step ahead o f the coming high interest rate regime when it actually expands margins.

Profits are only up 25% less than the expected INR 24-25 Bln mark at INR 22.54 Bln

The Active CaSA strategy for the bank seems to have worked wonders again with another 1.95 increase quarter on quarter to more than 43%. From here CASA would go on reducing once it reaches 47-49% levels in three-four quarters(at this pace). Average CASA as been reported duly at 39% , ad the gap is showing , which may be a disconcerting note for investors as the surge in retail and commercial deposits continues to bank the margin till rates are hiked.

However to reiterate, The Bank thus now has been completely clean on the paper trail in terms of its profit, asset growth and retail loan growth objectives , also fulfilling its rural objectives , covering the unbanked and continuing to improve its show while the fissures in its wholesale international book and the growth in retail NPAs coming hither will well be masked in the current reporting as well, leaving it another show of increased transparency  The bank has however totally dominated its peer HDFC Bank in the banking sweepstakes for the two universal banks heralded in India at the first stage of bank reforms in 1995.

India Morning Report: Imported Durham Wheat and the JP Morgan BPO

Canara Bank Near Town Hall
Canara Bank Near Town Hall (Photo credit: SumaVV)

What would your friendly neighbourhood snitch or hag have you see in India’s future now? BPOs recruiting for Voice processes and documentation work or captives claiming they are not BPO for the same work and a hoard of imported foods you buy now but will not afford on a salary six months after.

Unfortunately, our elites continue to get such side issues with  India education after being worse than a blind bat and halfway through their work life but one should not lose much sleep over such influences in your life as more and more recruiting shifts out of the magical BPO/IT abyss and returns to active traders, banking sales and i am sure a lot of non business administratives already pulled into quasi business development roles at one man MNCs having finally run their roost.

At least in the shadow banks and the foreign brokers we have been increasing recruiting breadth for the last 5-6 years despite shutdowns at Citi , RBS and UBS. Of course the recruiting profession itself and over the hill 50 something bankers remain unqualified in the new world so the global strategic direction is unlikely to be set anywhere nice soon so be careful what you wish for in a job or you might get performance linked appointments with fancy names and quickerr shutdowns than the Sasketchwan scare in North Canada

ICICI Bank is picking up the slack thankfully on a stronger day at the bourses and more thankful because that means market interest in SBI or PSU banks is increasingly turning merely technical in nature and ?india’s story of future consumption expansion in the hinterland is not making anyone secrete excessively rooting for SBI and the dud dudders from Union Bank to Canara and Syndicate, Dena, BOB and PNB hardly looking like having recovered or improved from their unholy business ethic of the last two decades which they were seemingly not a part of.

skyrise
skyrise (Photo credit: Brennan Mercado)

Etihad had another finger in India’s aviation pie though the reporting team got busted as a Bombay Tabloid by the last century’s sole network on Indian equities and is actuallya  scoop by Mirror  ( the city based TOI daily magazine of local specific mantra)

Bank Results Season: India Earnings (The Old and Weak) Will India jettison its Public sector behemoths as instruments of policy [SBI Q2 FY2013]

The deterioration in asset quality though well within control at SBI to 5.15% or INR 491 B does not meet management statements of no more deterioration in asset quality. The written off loans of INR 14.92 B and reducing provisions of INR 18.5 B from INR 22.73 B a quarter ago raise questions of capacity and capaability even as the Central bank has obliged with CRR cuts and the bank continues to manage the loest deposit base in the country ith the status as largest bank int he country borne in measure by share of loan assets and the size of asset book  as well as the market share computations for the sector in both retail and SME/corporate banking

However a future for India Financial Services may need to have a larger NBFC role designed aas per the latest policy documents or otherwise continue privatising bank franchises and allowing new banks with rural and priority mandates make the competition tougher whence sucha weak showing by SBI with only 5% growth in NII below INR 110 B for the quarter makes ita tough pill for the market to swallow. However, the current macroeconomic revival may let other banks pick up the slack and allow investors to ignore this quarter’s SBI records while the markets again take a fact check on how good the India story is.

Net profits for the quarter are INR 36 B ahead of estimates by more than 5% but the stock will drag the Banknifty in the current run with management guidance not being welcome. The year on year groth in profits does meet the benchmark of 30% at a 25% score bu tthat  is on a low base from underperformance after the bad loan cliff ensnared the bank

REstructurd loans are INR 46.94 B or 5% of the loan book roughly Additional slippages are INR 85 B compared to INR 103B last quarter (linked/seq)  but recoveries are also up by nearly 17% at INR 14.3B The loan book has grown to INR 9.56 T

 

Bank Results Season: Earnings Surprise(India Earnings): LIC Housing Finance (Q2 2013) Grows Loan Book To INR 690b

Though RBI ‘s new norms for banks may not be par for the course for the LIC subsidiary, it is growing strongly in loan assets after having controlled its growth of Developer portfolio shares on RBI insistence. NIMs fell to a low 2.1% but the ‘bank’ remains one of our top picks in the sector at its current prices

It had a minimal share of retail exposures in its retail growth and after the current rationalisation, it will go back to getting  to the richer Developer portfolios as it boosts its Net interest income to INR 3.54B and is likely to post INR 16.54 B for the full year

Provisioning has dropped 5 out of 6 to just under INR 7 B keeping profits high at INR 2.47 B Business Standard reports its best growth of 36% in the loan portfolio came in June / September 2010 hence it has been falling.

As we mentioned it tried to balance its portfolio from 50% developer to more retail with RBI egging it on.

This quarter the Loan portfolio is a sizable INR 690 B at 21% yoy growth and may easily reach INR 1 Trillion by Q1 2015 esp as it may be able to absorb more crorporate exposure ( Developers) Loan growth of above 20% at this size of assset portfolio underlines the growing capabilities of this

This is the third copy of the posterous blog i am posting as the now twitter company seems to have lost some of its softare contstructs losing my drafts and published documents ever so often

 

Bank Results Season (India Earnings) : Earnings surprise: ICICI Bank processes a few more growth triggers for Q2 2013

icici bank
icici bank (Photo credit: Wikipedia)

Net Profits have grown to a never before INR 19.60 B or $376.92M for the bank as Net Interest Income climbed to INR 33.71 B or $648.27 M with Treasury income of INR 1.72B helped other income to INR17.91 B  all growing at more than 30% over the year ago quarter. Q1 2013 growth was a little subdued in the middle of the near contraction in the Indian Economy on year but still a sequential improvement on March quarter to INR18.15B. The current Q2 2013 is therefore a sequential gain of 7.33% and even with a near 20% rate of growth in credit CAR including Tier II has inched up to less than 19% Deccan Chronicle ‘s INR 5B exposure was added to bad debt taking Net NPas up sharply to 0.78% from 0.71% in Q2

The bank is looking at bringing $1B in NII itself every quarter in less than 2 years and with Fee Income of INR 179 B year to date is likely going to manage a superior profitability with good NIMs on a loan book closing on to INR 3 Tln

The bank added a INR 5 B media industry account as NPA and i s otherwise unperturbed by the current sector massacre from bad loan provisioning PNB also proved results today and was able to grow credit and deposits by more than 17% on year Though public sector PNB has lost grip on profits, its cost of deposits at less than 7% might be a hearty target for a bank such as ICICI Bank not shy of wholesale deposits.

ICICI Bank has met competitive pressures from Private banks to grow its Deposits to INR 2.9 Tln which means total assets are over INR 3.3 Tln earning NIMs of 3% Savings rewards and social banking go a long way in improving its brand with retail depositors. Savings deposits have grown to INR 810B and 70% of that is retail (Chanda Kochar answers in analyst meet) Advances are INR 2.75 Tln, credit growing at 18%, retail at 14% (mortgages 14% and Cars 27%) with International starting regrowing credit portfolio at 6%

Kotak Bank in the meantime has grown CASA to a respectable 27% and YES Bank also ~20% with a 6/7% interest rate peg for retail depositors. NIMs are smaller at the smaller banks like Kotak and YES

 

 

Bank Results Season: India Earning Surprise:(Flash) Yes Bank Grows Lending Income By 37%

Yes Bank grew NII by 37% over last year in the latest quarter, a high number eve for smaller nimble banks as BoB reported struggling with 3.23% NIMs in the same quarter. With frequent Tier I and Tier II QIPs, the Bank’s Capital has hit 17.5% and Tier I Capital is also high enough to load even higher growth digits as Gross and Net NPAs fall off from already minscule levesl to 0.24% and 0.06% Net Profit is INR 3.06 B the jump of 30% over year also translating into healthy linked/sequential growth

Of course with banks like ING Vysya almost degrowing the Loan assets , static at around INR 300 B and PSE Banks growing NPAs to significant 1% levels at the best of breed banks, the room at the top is definitely available for anothe top notch bank from the 2000-04 ‘era’ to make an impact when new banks with existing lending books and rural branches join the club in a few months

UCO Bank may have disappointed but PSE banks have shown that the markets do not expect more than 20% Sales growth tat best of breed banks and a growth in the range of 40% matched by growing Other income does hand the challenge to established lackeys at Kotak or the survivors at PNB at the bigger accounts as MNC banks also struggle with financing the Global Indian Corporation and India’s trade grows to 3 times the current levels in the coming decade.

BTW, apart from auctions for ECB lenders to quotas for buying bonds in FII acocunts which grew the possibility to OINR 250 B RBI also lent INR 77000 Crores or INR 770 B in today’s one/ten year auction

NPAs from the Deccan Chronicle account may be t o the tune of another INR 1 B at the bank but are unlikely to pressure the balance sheet.

 

Bank Results season: SBI highlights NPA to 2.2% and Provisions of INR 8.9B

 

Gross NPAs for Q1 FY 2013 increased to 4.99% instead of estimated 4.7% and Net NPAs rose almost 20% to 2.2% from June 2011 in the just announced results the bank increasing provisions. Gross NPAs amount to INR74.9B and Provision Coverage for the Giant despite increasing are still much lower than the competitionand smaller public banks at below 65%

NII is just 111B, 5-8 B less than the street estimate and total provisions this quarter are lower at INR 24.6 B taking the bank to below 1900 in trades after the ires ran the shock up the market spine. Broader markets may survive this loss of confidence in the public sector as the market demands of removal of subsidies as part of deep seated reform also subside without the indices rerating below a 5200 bottom

More details as the bank management releases further details of their private massacre when the street expected that the income and loan related pown rovisioning had been completed by the bank in a surgical action last March and June and profits are expected to increase 128% but will still manage to outgrow a INR 25 B mark satisfying the requirement of a viable net margin with interest spreads under pressure

Deposits have grown to INR 11 T while the bank claims a revised CAR of 13+% as of June 30 while Total Net Income is 14.6B or less than $3 B th no growth in fees advisory and other income

Q4 NPAs were best in class at 1.02% doublling sequentially ( Net NPAs)

 

Deposits have grown to INR 11 T while the bank claims a revised CAR of 13+% as of June 30 while Total Net Income is 14.6B or less than $3 B th no growth in fees advisory and other income

Q4 NPAs were best in class at 1.02% doublling sequentially ( Net NPAs) Net Margins have infact improved as the bank manages a PAT of INR 37.5 B but we have derated the stock as it has shown an inefficiency in shooting NPAs and continuing pressures in sectors like Aviationa nd textiles apart from the industry wide press ure from Power, infracos and construction & Telcos which private banks have tyurned to their advantage.

 

Bank Results Season: A critical look at PSU Bank results >> Dena, Karnataka, PNB and BOB

 

The sector reported in unison on Friday and bad debts rose to an average of 3-4% at most banks that reported. However, first the two profitable ones that improved results, then prioritising the big ones BOB and PNB that have sizable profitability and asset advantages and then the rash of CBI, UBI and others. Global Capex slowdown will continue to affect the INR 6T in Power sector Loans (2010) which have already come to INR 4Tln in 2011 and are likely going downanother 25%

Uma Maheshwari and Nutan of CRISIL/S&P had a ok denoument of their cry wolf and as MOS suggested this could well be the last reported increases in NPLs but then I don’t know what MOS is saying right now.

Dena Bank

Dena Bank reported an NII of INR 612.24 Crs or INR 6.12 B, comparable to some of our food majors like Jubilant Foods (QSR) who reported INR 3.14 B selling pies in the same. Other income was characteristically subdued even at this profitable Mumbai based regional PSE at INR 1.41B

Jubilant’s net Profit margin was just 10% as Dunkin’ Donuts weighed in though the Pizza brand has 489 stores of its own. Dena’s operating profits of INR 4.57B or 60% and Net of INR 2.39 B or 31% underline the stable underlying growth in even public sector units though the preponderence of these inefficient beachheads of government donated welfare and 60s nationalisation dominating the Bank Nifty may still not be defensible

This bank counts 1% Net NPAs and 1.8% Gross NPAs. It counts 80% of its income from Treasury and Corporate thoughin this case Treasury independently contributes 28% of that combined income and a slightly better proportion in profits

The Bank has 0.91 Tln or 45% the size of an ICICI Bank. EPS 6.82 down yoy

Karnataka Bank

KTKBANK reported just INR2.26 B in Net Interest income and INR 0.91 B Other Income and a Net Profit of INR 0.83 Bln or 83 Crores on an asset book of 317B (FY2011)   Net NPAs even at the profitable unit are already 2% and Gross NPAs 3.31%

Treasury and Corporate (Lending and Bills) equally split the non retail business of 67%

EPS of 4.43 up sequentially from 4.42 and up 67% yoy

The Bank counts deposits of INR275B and Advances of 175 B last available for March 2011 The bank’s private sector advances do not count agricultural loans. Total Assets of INR 317B would be assumed to have grown only in single digits

Punjab National Bank

Gross NPAs are just INR 99.72B and Net NPAs INR 49B but 3.38% of gross and 1.68% of Net respectively. The bank has guided final NIMs of 3.5% so does not expect mrore than the mandated increase in provisions from here and recovery income is honeycoating the pot

Profits grew hardly in double digits below 15% for the megalith with INR 2.66Tln in non food loan assets that beats ICICI in loan assets by 20% and INR 6.7T in  “business mix” or balance sheet assets with Deposits of INR3.85 T and Loan assets of INR 4.59T, Credit and assets having grown 20%

NII is up a shade under 20% at INR3.7B and Other Income stable at INR1.2B, Net Profits growing 12% to INR1.25B Provisions grew from INR566Crs to INR900 Crores or INR16B incl Tax assets

Fee based Income is INR 549 Crores or 5.49 B and Net Interest margin despite a dip continues at 3.7%  ahead of all others the drop in NIMs having hit the third consequent quarter, still supersized from other competitors , the best NIMs being near 3.5% The Cost of funds for the bank is below 6% and Credit Deposit Ratio 77% to 76.4% in the current quarter. CASA is non standard at 35%

The banks retail assets are barely 10% of its loan portfolio, Power and Telco 8 and 2.6% an dthe bank holds INR 1.2T in investments This quarter’s restructured assets are just 5% of its total INR255B

The bank should hurt those going short at current levels

Bank of Baroda

Reported results today NIMs are don from 2.96% to 2.73% Restructured assets have however added only INR573 Crs or INR5.73B NII of INR27.98 B reasserts it is the top of the heap with PNB

BOB restruured assets have added INR7.5 B not in power and telco but in Textiles

 

IOB NPAs are up to 2.97% at the fag end of the results day. Allahabad Bank NII has gone up 12% to INR 13.7B.  IOB NII is 13.28B but provisions of INR5.2B may still be low with Gross NPAs half that of Canara and Union Bank at 44 Bln Allahabad Bank PaT is INR5.27 B and OBC at INR 3.94 Bln among others today

 

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