State Bank of India (SBI) on Tuesday (11 August) said net profit rose 10.2 per cent on year in the fiscal first quarter, as bad loan provisions fell at the nation's biggest lender by assets which has been taking steps to reduce its pile of soured debt. Net profit was Rs 3,692 crore ($575.6 million) for the three months ended June 30, compared with the Rs 3,411 crore average estimate of 20 analysts polled by Reuters. Gross bad loans as a percentage of total loans marginally rose to 4.29 per cent from 4.25 per cent in the previous quarter, while SBI's net bad loan ratio rose 12 basis points. Bad loan ratios at Indian banks have near-doubled in the past four years as weak economic growth hurt companies' ability to repay debt. At the same time, demand for loans has slowed. The speed at which banks booked new bad loans has eased as lenders such as SBI have strengthened criteria for loan applicants and react quicker to early signs of trouble. Banks are still wary about lending to stressed sectors such as infrastructure and steel, industry insiders say. Following the announcement of results, shares of SBI were trading 3.25 per cent down at Rs 273.90 on BSE. (Reuters)
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Mobile banking users in India account for over 50 per cent of its population at present, reports Haider Ali Khan The number of mobile banking users globally is forecasted to double to 1.8 billion, over 25 per cent of the world's population, in the next four years, according to research by KPMG using primary survey data supplied by UBS Evidence Lab. The Global Mobile Banking Report stated that mobile banking users in India account for over 50 per cent of its population at present. Adoption rates are highest in developing countries like India, which is about a 60-70 per cent. The survey also suggests that mobile banking and payment systems are increasingly being integrated with other technologies, driving an era of ‘Open Banking’. "The differentiation in mobile banking has been a difficult area and sustained differentiation is almost impossible. Many banks are adopting 'Mobile First' strategy, which provides a relatively better competitive advantage," Akhilesh Tuteja, partner and head of IT advisory services at KPMG in India, said. The availability of mobile banking services is a key indicator when consumers choose to switch banks and the report highlights a clear link between a strong mobile proposition, customer satisfaction and advocacy. Indian customers demonstrate the highest likelihood of changing banks driven by the availability of better mobile banking services. The report also says that as mobile banking technology is driving an area of ‘Open Banking’, where consumers can bank within context, across a variety of channels, operating systems and devices, including phones, tablets and wearable. The report highlights three key areas for banks to focus on in order to take advantage of the surge in mobile banking, and therefore prepare for the ‘Open Banking’ era. Mobile banking offers many opportunities for cross-selling other financial services, but unwanted sales messages can invade what the report calls ‘device intimacy’ and lead to customer complaints, reduced usage or even switching to another provider. Consumers tend to value personalised support via mobile services. The report urges banks to use, social media banking and cloud storage. Banks are investing unprecedented amounts in mobile and other technology. To stay at the fore, many large banks are increasingly acquiring technology start-ups and investing in incubators. Banks are urged to heavily invest in technologies that can evolve and protect against future threats, as well as tackle current pressures from malware and social engineering. Forty per cent of consumers have raised concerns about entering card details in mobile devices and the possibility of losing a handset. Biometric apps and finger print scanning are earmarked as ways to bolster the security of mobile banking, whilst ensuring ease of access; only ahandful of the main banks assessed in the research currently offerthis service.
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UBS's giant banner on Hong Kong's One Peking Road skyscraper, so big it has drawn complaints for keeping solar panels in the shade, is a testament to the renewed push among Swiss banks to win business from Asia's burgeoning ranks of millionaires.Switzerland's wealth managers have long courted Asia's super-rich amid slowing growth at home and an international crackdown on its bank secrecy rules that has made the country a less attractive place to keep cash.But the competition has recently shifted up a gear, with the new boss of Credit Suisse signalling he wants to embark on a similar path to cross-town rival UBS, which in 2011 chose to shrink its investment bank and focus on the more stable wealth management business, especially in Asia."Everybody wants to be in Asia," said Andreas Brun, a banking analyst at Switzerland's Zuercher Kantonal bank (ZKB). "It's not a sudden thing but they suddenly talk about it as the main strategy."The attractions are obvious, with a recent slowdown in growth still leaving many Asian economies far outpacing Western counterparts. Boston Consulting Group (BCG) forecasts private wealth in the Asia Pacific, excludingJapan, will grow on average by 9.7 per cent a year through to 2019, more than double the rate in Western Europe.According to the latest Asia Pacific Wealth Report published in October by Capgemini and RBC Wealth Management, the region's population of high net worth individuals - defined as those with investable assets of $1 million or more, excluding primary residence, collectibles, consumables, and consumer durables - grew 17 per cent to 4.3 million in 2013, while their wealth grew 18 per cent to $14.2 trillion.That compared with growth rates of 13 per cent and 12 per cent respectively in the rest of the world.But turning Asian riches into profitable business is no easy task for wealth managers.Asia's growing ranks of self-made millionaires and billionaires are proving more active in managing their wealth than Europeans living off inheritances, regularly playing banks against each other to get the best deal."It's their own money, not the money of the father or grandfather," noted ZKB's Brun.Asia's super-rich also tend to spread their money out over six banks or so. "Asia is a highly banked market," said Claude Haberer, head of Swiss bank Pictet's wealth management business in Asia. "Asians are willing to try out a bank but you have to explain what you bring to the table."And wealth managers are increasingly having to offer inflated pay packets to poach bankers in a region where demand for talent exceeds supply."Those who make it in the Asian market are those who are willing to invest significantly," Haberer said. "There is definitely an issue of minimum size, below which you just cannot pay the entry ticket."Private banks in the Asia Pacific typically need assets under management of more than $20 billion to be profitable, according to consultancy EY.To bulk up quickly, banks could look to acquisitions.In recent years, Julius Baer has bought Merrill Lynch's wealth management business outside of the United States, while Union Bancaire Privee has snapped up Coutts International. Both purchases helped the banks beef up their presence in Asia.Courting ClientsLeading the pack in size at the moment is UBS, the biggest wealth manager by assets globally and in the Asia Pacific, which BCG estimates will overtake North America in 2016 as the world's wealthiest region.In 2014, UBS managed $272 billion in the Asia Pacific region, according to a study from magazine Asian Private Banker. Citi's private bank and Credit Suisse rounded out the top three with assets of $255 billion and $154 billion respectively.But competition is heating up, with Credit Suisse's Asia Pacific CEO Helman Sitohang saying the bank was targeting the region's growing population of entrepreneurs.Judging by its giant Hong Kong banner, unveiled earlier this year as part of the bank's largest outdoor advertisement in the world, UBS is determined to defend its lead.Edmund Koh, the head of UBS's wealth management business in southeast Asia and Asia Pacific hub, said Credit Suisse faced a challenge to catch up."They say Asia is an important market going forward," he said. "For us, it has and will always be an important market."Koh hopes the Asia Pacific will contribute at least one third of UBS's private bank profits by 2017, compared with just under 30 per cent now.With almost 1,200 relationship managers, according to Asian Private Banker, UBS has more than twice as many bankers in Asia than any other wealth manger.Credit Suisse's Sitohang told Reuters the bank would consider raising headcount in the region, though retaining bankers can be just as important as hiring new ones.In the past, poaching advisers in the hope clients would move with them has been one way for banks to grow inAsia. This is less the case after the financial crisis spooked investors from moving their money around too much, according to Andrew Hendry, asset manager M&G Investments's Asia managing director."One CEO of a private bank said in his experience of losing bankers, only about 30 per cent of clients go with them," he said. "Pre-2008, you're looking at anything around 70-80 per cent."(Reuters)
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Over 100 CFOs from the city participated in the prestigious event, reports Suchetana RayAfter successfully launching CFO Forums in Kolkata, Pune, Mumbai, Bangalore and Delhi, YES Bank launched the Ahmedabad Chapter of their National CFO Forum on Friday (07 August), at a glittering event attended by prominent business leaders of the city.Conceptualised in 2011, YES Bank-National CFO Forum focuses on recognising and appreciating the indispensable role of the CFO in an organisation and has seen active participation from over 600 members from the CFO community across the country. The forum has been conceptualised in the form of chapters across India, with the Mumbai Chapter launched in September 2011. Speaking about the event, Rana Kapoor, MD & CEO, YES Bank said, "This highly interactive Forum brings together theastute and visionary leaders who have emerged as strategists in the execution of corporate vision and strategy. I believe that the evolving role of a Chief Financial Officer in today's business scenario will not only drive an organization's success but also propel CSR as a mainstream function of it. Through this Forum, we encourage greater participation of the CFOs in the knowledge economy of India." The Ahmedabad Chapter witnessed active participation from over 100 CFOs from the city. R S Sodhi, Managing Director, GCMMF Ltd or Amul inaugurated the event. This was followed by a panel discussion on "CFO's role in balancing CSR and Profitability — Creating a Sustainable Ecosystem".The panelists in the session were S B Dangyach, Managing Director, Sintex Industries Ltd., R J Joshipara, CFO, Nirma Group, Namita Vikas, Senior President & Country Head, Responsible Banking, YES Bank, Sunil Parekh, Strategic Advisor, Zydus,Jubilant Group and Parag Desai, Managing Director, Wahg Bakri. While the panel discussion dwelled on the scope and laws for CSR in India, it also highlighted the need to adopt it as not an obligation but a necessary activity of a company. The panelists also stressed on the need to ensure transparency among companies in the spend in social responsibilities. RS Sodhi in his speech highlighted the need for companies to understand the importance of giving back to society and not treat CSR as just another number in balance sheets. While some panelists spoke about the need for a regulator for ensuring transparency in CSR, others contradicted by saying that more regulations will only add to red tape, stressing on the need to keep CSR as a voluntary activity of a company. The next stop for this CFO Forum is Chennai, later in August and then Hyderabad in September.
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Rana Kapoor lists the developments which will shape the banking industry in India’s journey towards a $20- trillion economyRana Kapoor, Founder, MD and CEO of Yes BankThe Indian economy is poised for an orbit changing growth over the next two decades. A nominal growth rate of 12 per cent annually will catapult India to a $20 trillion size in less than 20 years, and subsequently lift India’s share in world economy to 8.5-9.0 per cent from 2.7 per cent currently. The banking system will undoubtedly have to play the protagonist role in this transformation. Not only are we going to witness a sustained rise in banking assets, but we will also see an increasing sophistication of products and solutions, banking of the ‘unbanked’ and rapid consolidation in the sector - in short, a ‘life-cycle transformation’!With emerging needs in the sphere of urbanisation, industrialisation, digitisation, education, financial inclusion, and global integration, as envisioned by the Government, I believe the following developments will shape the banking industry in India’s journey towards a $20 trillion economy. Technology will define banking contours in the future. This would include big data, cloud computing, smart phones and other such innovations. ‘Omnichannel’, not multichannel, will redefine the way customers interact with banks. For example, disseminating personalized offers on customers’ mobile phones, use of home video-conferencing system for personalized connect, leveraging face-detection technology for efficient cross-sell are some of the avenues through which technology will aid banking in the future. Prescient Marketing, which involves banks providing customers with the right incentives to tap social network usage to learn about customer preferences, will be another game changer in this Digital Age. Mobile Banking: It goes without saying mobile banking and mobile payments/commerce is truly the future. Amidst a high mobile density in India, the potential for leveraging this technology for offering financial services remains immense. There are over 900 mn mobile users in the country but only 40 mn mobile banking customers. In this respect, the JAM Trinity (Jan Dhan- Aadhar-Mobile) has the potential to change the face of banking and YES BANK fully endorses and complements the Government’s efforts in this direction. 'Creative Destruction': Technology will also lead to ‘creative destruction’ of banks. Banks will need to focus on innovation that raises competition and leads to better and cheaper services for customers. Banks may also partner to achieve scale and find best practices, combining their infrastructure into JVs. Also, outsourcing utilities like customer authentication, fraud checking, payments’ processing, account infrastructure, KYC processing, to existing technology service providers, could be key steps going forward. Cashless Banking: In Sweden, 4 out of 5 transactions are cashless. In India, use of hard cash peaked at 11.5% of GDP in 2009. Since then, it has moderated but continues to remain high at 10.5 per cent as of 2014. In the future, cashless banking will revolutionize ease of doing transactions with further penetration of internet (300 mn users in 2014) and mobile phones metamorphosing into a personal bank branch (smart phone usage doubled to 80 mn in 2014 in just 1 year). As per Morgan Stanley, Indian internet market could rise from $11 bn in 2013 to $137 bn by 2020, and this poses as an undeniable opportunity. Branchless Banking: Banking of the future, branchless banking, could help in achieving economies of scale in revenue generation and cost management. The increasing trend of branchless banking is leading to closure of traditional brick-and-mortar branches in advanced countries (Bank of America closed down more than 1,000 branches in last 5-years). Banking business model innovations could be combined with national platforms such as Aadhaar to reduce customer acquisition cost by 40 per cent in order to make branchless banking model even more viable. Innovation in ATM usage: As per World Bank estimates, the operational cost per transaction for Indian Banks is Rs 48 per Branch, Rs 25 for phone banking, Rs 18 for ATM, Rs 8 for IVR and Rs 4 for online. India has poor ATM penetration - there are only 11 ATMs for every 1 million people in India compared to 37 in China and 52 in Malaysia. In this regard, Solar ATMs could reduce set up cost by almost 50 per cent and also cater to power scarce rural areas. Infrastructure financing-building the foundation India has ~5 per cent share in the global infrastructure market, which is expected to increase to 9-10 per cent by 2025. The futuristic development models will evolve on the lines of 5:25 structure and PPP model for long-term financing. Additionally, there will be new arrangements in the form of Infrastructure Debt Funds, Green Banking and Viability Gap Funding. New Models to Serve MSMEs: The MSME sector contributes 8 per cent to the country’s GDP. SIDBI has estimated the overall debt finance demand of the MSME sector at $650 billion. New structures such as Cluster-based Financing, Capital Subsidy Policy for Technology Upgradation, MUDRA Bank, Credit Guarantee Schemes, Incubation Centres and start-up facilities will play an important role in the coming years. Competition and Consolidation: Banking landscape in India will see a transformation with the entry of new age specialized banks. The urge to innovate, compete and remain in business will also pave way for synergetic consolidation. The following are a few innovative thoughts that could become a differentiating reality over the next 15-20 years: Account number portability (on lines of mobile number portability)Efficient leverage of Big Data AnalyticsSecuritisation of retail loans Risk Management: As businesses evolve and the scale of banking increases, principles like dynamic risk management with Early Warning Signal approach need to be strengthened. US (Resolution Trust Corporation) & South Korea (Korea Asset Management), set up ARCs nearly 20-years ago to effectively dispose-off bad assets, paving the way for their ‘de-stressed’ banking future. The idea of setting up a National Asset Management Company, which will pool the larger stressed assets into one and find a suitable resolution package, needs to be taken forward. Easier Expansionary Regulations: I believe that in the future, it will be important to allow easier M&A in the banking space to achieve scale, along with freedom to setup branches and ATMs as desired. These above developments will present opportunities that will be critical for catapulting Indian banks in the top global league. The author is Founder, Managing Director and CEO of Yes Bank
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Brace for the worst. Indian banks will need more capital than what was thought earlier to comply with Basel-III capital norms and fuel growth. India Ratings is of the view that an additional Rs 1 lakh crore will be needed to get banks into shape given their exposure to high leverage borrowers; the share of state-run banks will be Rs 93,000 crore. In effect, the capital needed will be excess of the Rs 2.40 lakh crore estimated by the rating agency to comply with Basel-III requirements which kick in from fiscal 2019. India Inc Will Hit BanksThe study reveals that banks would need an average 24 per cent reduction in their current exposure to ensure reasonable debt servicing (1.5 times interest coverage (ICR)) by these corporates on a sustained basis. For state-run banks, which have about 90 per cent share of this exposure, this amount comes to around Rs 93,000 crore or about 1.7 per cent of their fiscal-2015’s (estimates) of risk weighted assets. “Assuming banks provide for this haircut either as a provision ramp-up or by building additional capital buffers, this exposure can add significantly to our estimate of Rs 2,40,000 crore of common equity tier-1 (CET1) needed for the Basel-III transition”, said India Ratings. The overall debt reduction or haircut required would be around 24 per cent of the bank debt analysed by the rating agency. While companies in the power, other infra and iron and steel sectors would need a haircut of 20-30 per cent, a few deeply leveraged names in the textile and sugar sectors might require a higher amount of debt reduction (30-40 per cent. If we include the seven (Rajasthan, Uttar Pradesh, Haryana, Punjab, Andhra Pradesh, Madhya Pradesh and Tamil Nadu) distressed state electricity boards (including only their distribution entities) to the analysis using our estimate of their fiscal 2015’s debt and their respective EBITs (earnings before interest and taxation) at their operating best over the last 10 years, even then they would need a minimum 30 per cent haircut. Mint Road Was Spot OnIt might be recalled that the Reserve Bank of India’s Financial Stability Report (June’2015) had observed that gross non-performing advances (GNPAs) of banks as a percentage of gross advances increased to 4.6 per cent from 4.5 per cent between September 2014 and March 2015. The restructured standard advances during the period also increased, pushing up stressed advances to 11.1 per cent (10.7 per cent). State-run banks recorded the highest level of stressed assets at 13.5 per cent of total advances at end-March 2015, compared to 4.6 per cent in the case of private banks. The net non-performing advances (NNPAs) as a percentage of the total net advances for all banks remained unchanged at 2.5 per cent at end-September 2014 and end-March 2015. But at the bank group level, NNPA ratio of state-run banks increased to 3.2 per cent (3.1 per cent); and in the case of private banks to 0.9 per cent (0.8 per cent). The FSR made particular mention of the mess in the power sector. It noted that the deteriorating financial health of distribution companies (Discoms) is an area of concern. As state governments have not been able to strengthen their financial health under their financial restructuring plans (FRP). That’s because discoms’ have been unable to comply with the requirements relating to the elimination of the gap between average cost of supply (ACS) and average revenue realised (ARR), reduction of transmission & distribution (T&D) losses, fixing tariff on a regular basis and setting up of the State Electricity Distribution Responsibility Act. Banks have restructured around Rs 53,000 crore of the seven discoms’ (Rajasthan, Uttar Pradesh, Haryana, Punjab, Andhra Pradesh, Madhya Pradesh and Tamil Nadu) exposure under FRP. The moratorium period for repayment of the principal amounting to Rs 43,000 crore ended-March 2015. “Considering the inadequate fiscal space, it is quite likely that the state governments might not be in a position to repay the overdue principal and installments in time… the probability of slippage of this exposure into NPAs is very high considering the implementation of new regulatory norms on restructuring of loans and advances effective April 1, 2015”. The last line is a reference to the fact that Mint Road has made it clear that even restructured advances will be deemed as NPAs from the current fiscal. You have not heard the worst!
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The amount raised will be used by YES Bank to finance Green Infrastructure Projects like solar power and wind power in the Renewable Energy space, writes Monica BehuraYES Bank, India’s 5th largest private sector bank, has raised Rs 315 crore through the issue of Green Infrastructure Bonds to International Finance Corporation, Washington, member of World Bank Group on a private placement basis. This is the first investment by IFC in an Emerging Markets Green Bond issue in the World. The bonds are for a tenor of 10 years. The amount raised will be used by YES Bank, to finance Green Infrastructure Projects like solar power and wind power in the Renewable Energy space. KPMG in India will be providing the Assurance Services annually, on the use of proceeds in line with the Green Bond principles. This is the second such green bond issuance by YES BANK after a highly successful issuance of Rs 1000 crore in February 2015 The bank has raised a record $1.2 billion capital raised by the Bank in 2014-15 through multiple transactions including a $500 million funding in May 2014, $422 million Syndicated Loan in October 2014 and $200 million Loan from Asian Development Bank in December 2014. In January 2015, YES Bank also signed an MoU of $220 million with OPIC, the US Government’s Development Finance Institution and Wells Fargo to explore financing to MSMEs. Given the Govt. of India’s focus on India’s Renewable Energy Potential and target of 175 GW of additional capacity installation by 2022, it is estimated that the renewable energy sector will require significant financing. Currently, there are a number of challenges in the existing financing mechanisms including sector limits, high interest rates and Asset-Liability mismatch, and therefore there is a need to evolve innovative financing mechanisms to aid projects in the renewable energy and energy efficiency space. Green Infrastructure Bonds are one such avenue to allow for financing to flow to vital green energy projects.
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Britain took a 1.1 billion pound ($1.7 billion) loss on its first sale of shares in Royal Bank of Scotland (RBS) on Tuesday, sparking accusations of poor timing from opposition politicians. The UK government sold a 5.4 percent stake in RBS at 330 pence per share, a third below the price paid when Britain rescued the bank with 45.8 billion pounds of taxpayer cash at the peak of the 2007/09 financial crisis. The move raised 2.1 billion pounds and is expected to be followed by several more sales. Overall, the government is sitting on a 15 billion pound loss on its holding, based on the current stock price and its average purchase price of 502 pence. But the sale was more about starting the process of returning RBS to the private sector and showing investors the government is reducing its interference in the bank, rather than avoiding a loss, people familiar with the decision told Reuters. "While the easiest thing to do would be to duck the difficult decisions and leave RBS in state hands, the right thing to do for the economy and for taxpayers is to start selling off our stake," Finance Minister George Osborne said. But the opposition Labour Party slammed the sale. "RBS had to be bailed out urgently, but it doesn’t have to be sold off at the same speed," said Chris Leslie, its finance spokesman. "The Chancellor (Osborne) needs to justify his haste in selling off a chunk of RBS while the bank is still awaiting a U.S. settlement for the mis-selling of sub-prime mortgages," Leslie added, referring to a potentially massive fine from U.S. authorities, related to RBS's past sales of U.S. mortgages. RBS has set aside 2.1 billion pounds for a settlement but analysts estimate it could cost as much as 9 billion pounds, which has weighed on the stock. The share sale, which cuts taxpayers' holding to 72.9 percent from 78.3 percent, marks a milestone in Britain's recovery from the financial crisis, and is part of Osborne's strategy to improve the country's finances. More PowerThe move had been on the cards since Osborne in June accelerated the timetable for selling RBS, after his Conservative Party won May's national election with a surprise majority, giving his party more power in government. He has lost no time since then in pressing on with his plans for Britain's economy, including the sale of more shares in Lloyds Banking Group and a budget that included a shift away from welfare spending to higher wages for workers. Osborne aims to sell at least three quarters of its RBS holding, currently worth about 25 billion pounds, in the next five years. UK Financial Investments (UKFI), the body that holds the stake, said it sold 630 million shares in a quick-fire sale to institutional investors after the market closed on Monday, slightly more than it had planned to sell. The sources said other benefits of the sale are that it increases liquidity in the stock and shows there is investor appetite, particularly in Britain and the United States, which accounted for 85 percent of demand, one source said. More and bigger sales to institutions are likely, but UKFI could also opt for a trading plan that involves small frequent sales in the market, or a sale to retail investors. The 2.3 percent discount to RBS's closing price on Monday, at which the shares were sold, was narrower than the 3.1 percent discount on the government's first sale of Lloyds shares in September 2013. At 1215 GMT, RBS shares were down 0.9 percent at 334.7 pence, outperforming a weak European banking index. Investors put in bids for 2.4 times more than the number of RBS shares sold by the government, a person familiar with the matter said. RBS CEO Ross McEwan said he was pleased the sell-down had begun, adding it reflected the progress the bank had made "to become a stronger, simpler and fairer bank". RBS was briefly the world's biggest bank by assets, but has more than halved its assets and the size of its investment bank and sold businesses around the world. Britain has sold down its stake in Lloyds at a profit over the past two years and now holds less than 14 percent. The taxpayer could make at least 2 billion pounds on the Lloyds bailout, also at the height of the financial crisis. The RBS sale was handled by Citigroup, Goldman Sachs , Morgan Stanley and UBS. (Reuters)
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