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Here you will find all the research and views that we post on Equitymaster. Use the tools to customize the results to suit your preference!


Banking: Treasury misnomers...

Apr 27, 2007

A spurt in interest rates over the past year raised concerns over Indian banks' balance sheets. These banks took a substantial hit on their investment portfolios on account of the marked-to-market (MTM) provisioning of investments in the available-for-sale (AFS) category. Most banks transferred long-dated G-Secs to the held-to-maturity (HTM) category by taking big one-time provisioning hits over the last two years. This helped to insulate their income statements to an extent.

Banks: Of reforms and more...

Apr 20, 2007

Financial sector reforms in India introduced as a part of the structural adjustment in the early 1990s have had a profound impact on the functioning of the financial institutions, especially banks. The principal objective of financial sector reforms was to improve the allocative efficiency of resources, ensure financial stability and maintain confidence in the financial system by enhancing its soundness and efficiency. At the same time, reforms were also undertaken in various segments of financi

Banks: Crystal gazing...

Oct 26, 2006

Reckon this. The cumulative assets of top 5 Indian banks equal the assets of 5th largest bank in China. The top 5 Indian banks command 45% of total banking sector assets compared to global standards of 70% to 75% of total assets. The country's largest bank, SBI, features at the 80th position amongst the top banks in the world.

Banks: Good times ahead?

Oct 6, 2006

After a brief period of skepticism about sustenance of credit growth, roll back in PLR hikes and chances of further liquidity tightening, banking stocks are back in the reckoning. Reasons being no visible signs of slowdown in credit offtake and stability in interest rates. In fact, the banks' treasury portfolios that were so long a cause of anguish to investors (because of the mark-to-market losses) have of late caught their fancy. This is due to the benign excess provisioning on the AFS (availa

UWB: An attractive bait?

Sep 12, 2006

Established in 1907 as Satara Swadeshi Commercial Bank, United Western Bank (UWB) was converted into a scheduled commercial bank in 1951. With majority of the branch infrastructure in Maharashtra, the bank has considerable penetration in the rural segments of the state and offers ready infrastructure to financial entities looking to expand their scale in this region. While the public shareholding in the bank stood at 54% at the end of 1QFY07, SICOM is the principal shareholder with more than 10%

Banks: Penetration concerns!

Aug 18, 2006

An unprecedented demand for credit over the past 2 fiscals led to the country's credit to GDP ratio chart a steep climb. Infact in absolute terms the volume of credit nearly doubled between FY03 and FY06. The consistent 30% YoY growth in incremental disbursals persuaded banks to lighten their treasury portfolios and concentrate on the higher yielding advance book. The growth was not just in the retail segment (especially mortgage loans) but also in the corporate book (primarily SMEs). The corpor

India: Mis-governance at its best!

Aug 8, 2006

Addressing the 35th convocation of IIT Bombay in August 1997, the legendary jurist Nani Palkhivala started with a note of warning, that "Never had India in its entire history ever reached a lower level of degradation than it had reached now. The only achievement of the Indian democracy had been that it had survived unfractured for fifty years. We started our republic with three inestimable advantages. First five thousand years of civilization behind us, second a political entity united under

Banks: Buyer beware!

Jun 23, 2006

The legendry investor Warren Buffet in an interview to 'Fortune' once quipped, "In economics, interest rates act as gravity behaves in the physical world". The rate hike triggered liquidity drought has put on hold the banking sector's claims of sustenance of a robust credit cycle. The shift from the falling interest rate scenario (FY01 to FY04) to a rising one (FY05 onwards) is expected to have telling impacts on the banking sector. While the former gave the players in the sector the comfort of

Banks: After an eventful FY06...

May 26, 2006

Better economic growth, relatively lower interest rates, capacity expansion by corporates, retail credit penetration and technological upgradation are factors that have facilitated the banking sector's 'dream run' so far. In the initial years of this decade, with the spiraling bond prices, banks could afford 'lazy banking'. Later on (2004 onwards), the highest credit growth in two decades, net interest margins and asset quality comparable to global standards and extended reach, more than made up

Banking sector: Growth converging with prices?

Mar 10, 2006

India embarked on the trajectory of economic reforms in the wake of a serious balance of payment (BoP) crisis in 1991, with banks being the mainstay of financial intermediation. The objective of the banking sector reforms was to promote a diversified, efficient and competitive financial system with the ultimate objective of institutional strengthening. As the banking system became liberalised and financial markets developed concurrently, the conduct of monetary policy was also tailored taking in

Banks: The inevitable 'Tier-III'

Feb 3, 2006

The stalwarts of the North Block are nowadays oft heard reiterating their confidence in the Indian economy and their faith in the economy's potential to achieve 8% GDP growth targets. Understandably therefore, the banking and financial sectors remain one of their priorities when it comes to regulatory licensing and policy framework. In one such development, the central bank recently resolved one of the sector's biggest concerns about capital shortage.

Bank of Baroda public issue: Our view

Jan 16, 2006

Bank of Baroda’s second public issue (100% book building) for 71 m equity shares, at a face value of Rs 10 each, will be open for bidding between the 16th and 20th of January 2006. The bank has reserved 7.1 m shares for eligible employees and minimum 22.4 m shares (35% of net issue) for retail investors. Going by the price band of Rs 210 to Rs 230, the bank is expected to mop up Rs 16.3 bn (at the higher end of the band) through the offer. The issue is slated to bring down government's holding i

Banks: Banking on 'deliverables'!

Dec 27, 2005

In 1950, the old Imperial Bank of India was ten times bigger than the Hong Kong & Shanghai Bank (HSBC). Since then, the Imperial Bank has morphed into the State Bank of India (SBI), our domestic banking behemoth. It towers over its competition here. Yet, SBI is today a mere tenth of the modern HSBC's size. This nugget tells us a lot about how Indian banks - just like their peers in manufacturing - have lost out in the quest for global scale.

Banks: Where is the money?

Aug 12, 2005

Having posted robust performance for 1QFY06, banking entities remain the cynosure of the investor's eye, irrespective of the fact as to whether their valuations support the sentiments or not. The disturbing factor is that the 'optimism' is at times devoid of a clear outlook as to whether the performance is sustainable.

Banks: The interest hike effect...

Apr 19, 2005

Amidst bearish sentiments in the markets, the news of banks hiking their corporate lending rates has kept investors wary of investment in equities for the past few trading sessions. While the PLR rates do not change, the spread that the 'AAA' corporates enjoy due to the banks offering them 'sub-PLR' rates, will now shrink. Banks that were quoting interest rates on an average 3% below PLR (approx: 7.5%) are now expected to offer loans at PLR less 2.5% (i.e. above 8%).

BOI: Should you subscribe?

Mar 22, 2005

'Assessing quality of assets is imperative for valuing a banking entity', may be a statement sounding clichéd. But when speculations of prospective mergers and public issue announcements cause investors to go gung-ho on the banking sector, it becomes important to reinstate these basic doctrines of investing.

Banks: Ringing in reforms

Mar 4, 2005

The budget speech, delivered by the FM, seemed to be articulated to bring in reforms that will sweep across India’s financial sectors in the coming months. The reason being, India would continue to ‘shine’ (read achieve targeted 6.9% GDP growth), if and only if, the financial backbone is strong enough to disburse credit to agriculture and India Inc. Not faltering on his balancing act, the finance minister also exhibited his far-sightedness in dispensing the following ‘orders’ to the country’s ba

PSU Banks: 3QFY05 contradicting 9mFY05

Feb 15, 2005

The PSU banking sector posted a mixed performance for the quarter ending December 2004 with the big daddy SBI dwarfing all its peers in every respect. With most players having improved their capital adequacy ratios and showing proactiveness in safeguarding their asset quality, the sector seems to have of late, been focused on quality rather than quantity (which is not necessarily a bad thing).

PSU Banks: Worth investing?

Dec 17, 2004

Mammoth balance sheet sizes, bloated work force and lack of operating efficiency are some of the common characteristics associated with PSU banks. To shake off this image and get rid of their government legacy, PSU banks are now seeking more autonomy. As opposed to the common perception, these banks are also striving to catch up with their private sector counterparts, in all respects.

SBI: Core business drives growth

Nov 1, 2004

SBI, the largest bank in the country, reported a rather improved quarterly performance for the September quarter relative to its performance over the last few quarters. For 2QFY05, while the bank's topline rose 6% YoY (which is a healthy sign), bottomline witnessed a YoY growth of nearly 9%. There has, however, been a significant improvement in the bank's net interest income highlighting the strength of its core business. There has been a significant fall in other income. However, the same has b

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