Information technology spends by financial institutions is expected to increase by 9.8 per cent to around Rs 50,000 crore in 2015, according to research firm Gartner."Indian banking and securities companies will spend Rs 499 billion (49,900 crore) on IT products and services in 2015, an increase of 9.8 per cent over 2014 spend of 455 billion rupees," it said in a note.This includes spending by financial institutions on internal IT which includes in-house personnel, hardware, software, external IT services and telecommunications, it added."Firms in the industry are investing to strengthen their operational infrastructure to support regulatory needs, as well as sustain increasing demands from the digital channels," its research director Rajesh Kandaswamy said.He added that the upcoming entry of 11 payments banks and 10 small finance banks will also help bolster the spends on the information technology products and services.On the broad areas for the investments, he said the banks will increase investments in digital solutions, modernise back-end systems and increase their reliability and speed.(PTI)
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Moody's Investors Service on Monday (02 November) upgraded its outlook for India's banking system to 'stable' from 'negative' on expectation that a gradual improvement in the operating environment for lenders will lead to lesser growth in bad loans in future.Moody's had assigned a negative outlook to the Indian banking system in November 2011 as it was of the view that the asset quality of the lenders was deteriorating."The stable outlook on India's banking system over the next 12-18 months reflects our expectation that the banks' gradually improving operating environment will result in a slower pace of additions to loans problem, leading to more stable impaired loan ratios," Moody's VP & Senior Credit Officer Srikanth Vadlamani said.In the report titled 'Banking System Outlook India: Gradual Improvement in Operating Environment Drives Stable Outlook', Moody's said the stable outlook is based on Moody's assessment of five drivers - improving operating environment, stable asset risk and capital, stable funding and liquidity.Also stable profitability and efficiency and the government support has supported a stable outlook for the sector, it said adding the recovery in the asset quality would be U-shaped rather than V-shaped, because corporate balance sheets remain highly leveraged.On the operating environment, Moody's expects that India will record the GDP growth of around 7.5 per cent in 2015 and 2016."Growth has been supported by low inflation and the gradual implementation of structural reforms. An accommodative monetary policy should support the growth environment," the report said.As for asset risk and capital, Moody's said that asset quality will stabilise. In particular, while the banks' stock of non-performing loans may continue to rise, the pace of new impaired loan formation in the current financial year ending March 2016 will be lower than the levels seen in the past four years.(PTI)
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Kotak Mahindra Bank Ltd, India's fourth-biggest private sector lender by assets, reported a better-than-expected 28 per cent increase in quarterly profit and a stable bad loan ratio, sending its shares up more than 4 per cent. Kotak Mahindra, which last November agreed to buy smaller rival ING Vysya for $2.4 billion in what was the country's biggest bank takeover, said net profit was Rs 570 crore ($87.5 million) for its fiscal second quarter to September 30 from Rs 445 crore reported a year earlier. Analysts had expected a net profit of Rs 438 crore, according to data compiled by Thomson Reuters. Gross bad loans as a percentage of total loans were 2.35 per cent, compared with 2.31 per cent in the June quarter. The bank said year-ago numbers were not comparable since ING Vysya operations were combined effective April 1 this year. Kotak Mahindra has previously guided for higher credit costs this fiscal year as it makes more provisions related to the acquisition.(Reuters)
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ICICI Bank Ltd, India's top private sector lender by assets, reported a 12 percent increase in quarterly profit due to faster retail loans growth. The bank also said on Friday it agreed to sell a 9 percent stake in its general insurance joint venture to partner Fairfax Financial Holdings Ltd in a deal that would value the venture - ICICI Lombard General Insurance Co Ltd - at $2.6 billion. India's banking sector has been hobbled by slower loan growth and a surge in bad loans as economic growth slowed in the past three years. State-run lenders who dominate the nation's banking system with a more than 70 percent share of loans, also account for bulk of the bad loans estimated at nearly $50 billion. Among the private sector lenders, ICICI, which is also listed in New York, has the highest bad loans in absolute terms. ICICI's gross bad loans as a percentage of total loans were 3.77 percent in the September quarter, compared with 3.68 percent in the previous three months. The bank has previously said it had stepped up monitoring and recovery of bad loans and was reducing concentration of top corporate borrowers. Net profit rose to 30.3 billion rupees ($465 million)for its fiscal second quarter to Sept. 30 from 27.09 billion rupees reported a year earlier, ICICI said in a statement. Analysts on average had expected the lender, categorised by the central bank as one of the two "too big to fail" banks, to report a net profit of 30.24 billion rupees. Net interest income in the September quarter grew 13 percent on year on the back of a 17 percent growth in domestic loans. Retail loans within the total grew at a faster pace of 25 percent from a year ago period. Kotak Mahindra Bank Ltd, India's fourth-biggest private sector lender by assets, earlier on Friday posted a 28 percent increase in quarterly profit and a stable bad loan ratio. (Reuters)
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PNB Housing Finance Ltd has hired banks including Barclays, JPMorgan and Morgan Stanley for a 25 billion rupees (about $385 million) initial public offering, IFR reported on Friday, citing two sources close to transaction. Indian investment banks Kotak and JM Financial will also advise PNB Housing in the planned IPO, slated for the first half of 2016, IFR, a Thomson Reuters publication, said. State-run Punjab National Bank owns a 51 percent stake in PNB Housing, while Carlyle Group owns the remainder.
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A group of government-appointed advisors has recommended sweeping changes to India's outdated and overburdened bankruptcy system, aiming to modernise a process that takes several years and costs investors and taxpayers billions. The changes would be the most ambitious overhaul to date of rules governing the liquidation or revival of companies in India, a country with no single bankruptcy code and where competing laws, unclear jurisdictions and inadequate resources can leave cases languishing for decades. The proposals, to be handed to the Finance Ministry as early as Monday, will impose deadlines for the first time and establish a network of insolvency professionals to lighten courts' workload and tackle delays, T.K. Viswanathan, chairman of the Bankruptcy Law Reform Committee, told Reuters. Under current rules, even deciding whether to save or liquidate an ailing company can take years, leaving it in the hands of managers who can - and do - strip assets with impunity. Under the proposed changes, a decision would have to be reached in 180 days - even 90 days for fast-track applications, Viswanathan said. "The whole essence of our exercise is that everything is done within time," he said. Foreign and domestic investors say the difficulty in exiting ventures can deter them from entering. Cases such as the protracted collapse of liquor tycoon Vijay Mallya's Kingfisher Airline empire have burnt investors. The airline was grounded in 2012 with some $1.5 billion in debt and its shares are now worthless, but creditor banks seized his former Mumbai headquarters only this year. The fate of his Goan villa is stuck in a prolonged court tussle. India ranks 130 out of 189 in the World Bank's Ease of Doing Business report, below Lesotho and Cameroon, not least because of its poor performance in resolving insolvency. The World Bank says it takes 4.3 years on average, more than twice as long as in China, with an average recovery of 25.7 cents on the dollar, one of the worst among similar size economies. 'Dead Horses'Troubled companies in India, or their creditors, largely turn to the Official Liquidator, a government-appointed officer attached to the country's high courts, who administers assets and oversees liquidation. Banks can also turn to separate Debts Recovery Tribunals (DRT), partly staffed by officials on assignment from the banks themselves and overseen by the Ministry of Finance. Both are overstretched; on visits to their offices in India's financial capital, Mumbai, computers were often off and always outnumbered by teetering pillars of files. In the cramped Mumbai office of the DRT, a tribunal considered far speedier than the courts, a Ministry of Finance letter on the notice board urged officials to move faster, as cases were "in many cases taking more than four years". Inside, officials complained they had little power to draw a line under languishing cases. "They are all dead horses," said one, gesturing to the day's case list. "They are never going to run any races, but you have to keep the dead stock." Chief among the problems is that for a single troubled company, creditors and owners can all initiate competing proceedings in different courts, tribunals and states. Current legislation - especially the Sick Industrial Companies Act of 1985 - is geared towards reviving companies, so appeals frequently follow a wind-up order, resulting in virtual paralysis. "The Official Liquidator system is a disaster. It takes a minimum of five years and can take 10 years, by which point there is virtually no value left in the asset," said Bahram Vakil, partner with law firm AZB & Partners in Mumbai and a member of the reform committee. "There is a crying need (for change). That system has completely broken down." Another committee member, M.R. Umarji, a consultant at the Indian Banks' Association and former central bank official, said staffing constraints meant it could take 15 to 20 years to wind up a company: "There are very limited numbers of persons available and there are hundreds, thousands of companies to be wound up." Proposed changes will scrap the Official Liquidator and introduce a system of registered insolvency practitioners, with a regulatory body, working under a company law tribunal. Practitioners, lawyers and drafters of the law hope it will professionalise the process, committee members said. The changes, which would probably go to parliament next year, must first overcome a mindset that is geared to avoiding, not hastening, failure. They also need to provide the means to speed it up, through initiatives to take courts online and generate a corps of insolvency practitioners. "The law can give the principles, but it requires enabling infrastructure for it to be implemented effectively," said Debanshu Mukherjee, of the Vidhi Centre for Legal Policy, a think-tank that advised the committee. "Even an efficient judge cannot work without a support system." (Reuters)
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The Bank of Japan held off on expanding its massive stimulus programme on Friday, preferring to preserve its dwindling policy options in the hope that the economy can overcome the drag from China's slowdown without additional monetary support. But the central bank is likely to remain under pressure to expand its already massive asset-buying programme as slumping energy costs, weak exports, and a fragile recovery in household spending keep inflation well short of its 2 percent target. Core consumer prices fell 0.1 percent in the year to September, a second monthly drop, while household spending slid even as job availability hit a two-decade high. "The effect of the yen's weakness (on import prices) is expected to taper off and consumer prices will probably weaken further from around the year-end," said Yuichi Kodama, chief economist at Meiji Yasuda Life Insurance. "We forecast the BOJ will adopt more easing next January." The BOJ maintained its pledge to increase base money, or cash and deposits at the central bank, at an annual pace of 80 trillion yen ($662 billion) through aggressive asset purchases. The dollar slid against the yen and the Nikkei share average lost ground after the decision, but the moves were short-lived. "This is what I would call decisive inaction on the part of the BOJ," said Stefan Worrall, cash equities manager at Credit Suisse in Tokyo. "They played this very much by the book, not leaving any room for confusion by waiting until after the market opened for its afternoon session." Markets will now focus on the BOJ's twice-yearly outlook report and Governor Haruhiko Kuroda's news conference later on Friday for clues to the timing of any future monetary easing. With the economy skirting recession, the BOJ is likely to cut its economic growth and inflation forecasts for the fiscal year that began in April. But it will only slightly alter its forecast that inflation will hit 1.9 percent next fiscal year, sources have told Reuters, allowing it to argue that Japan is on track to hit its 2 percent target. Glimmer Of HopeJapan's economy contracted in April-June and may shrink again in July-September on weak exports. Many analysts say any rebound in the current quarter will be too weak for the BOJ to achieve its 2 percent inflation target next year. Economists were split on whether the BOJ will pull the policy-easing trigger on Friday, although market bets leaned toward no action after a recent run of positive data. Some BOJ policymakers have worried that sluggish demand in emerging Asian markets could hurt both output and corporate confidence badly enough to delay planned capital investment and wage hikes. Those concerns eased somewhat after data on Thursday showed factory production rose 1.0 percent in September. BOJ officials have said economic conditions are much better now than last October, when it surprised markets by easing policy after spending took a direct hit from a sales tax hike, and companies were in no mood to raise wages. But wage growth remains subdued and households are reluctant to spend due to the rising cost of living from a weak yen, which drives up import prices. The BOJ considers "shunto" wage hike negotiations between business and labour unions, which kick off from year-end, as key to whether inflation will accelerate sustainably. "I expect the BOJ to be on hold for the rest of the year," said Koya Miyamae, senior economist at SMBC Nikko Securities. "If it was to take action this year, that would be to support wage hikes at 'shunto' and the best time to do so should have been this month." (Reuters)
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By Arshad Khan Yes Bank Ltd on Thursday (29 October) said net profit rose 26.5 per cent in the September quarter, thanks to higher net interest income (NII) and other income, and lower provisions for bad loans. Net profit stood at Rs 610.41 crore, compared with Rs 482.54 crore in the year-ago period. Analysts had expected net profit of Rs 596 crore on net interest income of Rs 1,099 crore for the quarter. “Yes Bank has delivered another consistent quarter of sustained financial performance reflected by healthy growth in net profit of 26.5 per cent and driven by steady increase in NII and stable asset quality,” Rana Kapoor, managing director and CEO of the bank, said in a press release. Other income, or income earned from fees, trading in foreign exchange and gain on revaluation or sale of investments, rose 22.25 per cent to Rs 618.10 crore from Rs 505.62 crore in the same period last year. However, net NPA (non-performing assets) grew 0.2 per cent to Rs 158.6 crore from 0.09 per cent in the same quarter a year ago. Asset quality of the bank still remained stable for the quarter. "The recent RBI approval for setting up AMC (Asset Management Company) operations and commencement of PD business will further deepen our value proposition for the company as well as retail customers," said Kapoor. "There has been no sale to ARC (Asset Reconstruction Company) during the previous four quarters. Also, the bank has not refinanced any loan through the 5/25 route," the bank said in a statement. Yes Bank said advances grew by 29 per cent Rs 80,015 crore and deposits increased by 24 per cent to Rs 99,344.3 crore compared to same quarter last year, adding net interest margin inched up 10 basis points to 3.3 per cent year-on-year but sequentially that remained flat. Corporate banking business accounted for 68.2 per cent of advances portfolio and the rest 31.8 per cent constituted by retail & business banking. The share price of the bank closed 1.95 per cent up at Rs 743.50. Sensex closed 0.75 per cent down at 26,838.
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Export-Import Bank of India (Exim Bank) has extended a Line of Credit (LOC) of $87 million to the Government of the Republic of Zimbabwe, for renovation/up-gradation of Bulawayo Thermal Power Plant.The LOC Agreement to this effect was signed in New Delhi on Tuesday (October 27) by H.E. Mr. Patrick Anthony Chinamasa [M.P.], Minister of Finance and Economic Development, on behalf of the Government of Republic of Zimbabwe and Yaduvendra Mathur, IAS, Chairman & Managing Director, on behalf of Export-Import Bank of India.With the signing of the of the agreement for $87 million, Exim Bank, till date, has extended two LOCs to the Republic of Zimbabwe, at the behest of India, taking the total value of LOCs to $115.60 million. The first LOC of $28.60 million was extended in June 2013 for up-gradation of Deka Pumping Station and River Water Intake System in Zimbabwe.Exim Bank has now in place 201 Lines of Credit, covering 63 countries in Africa, Asia, Latin America, Oceania and the CIS, with credit commitments of over $12.28 billion, available for financing exports from India. Under the LOCs, Exim Bank will reimburse 100% of contract value to the Indian exporters, upfront upon the shipment of equipment and goods/ provision of services. Exim Bank's LOCs afford a risk-free, non-recourse export financing option to Indian exporters. Besides promoting India's exports, Exim Bank's LOCs enable demonstration of Indian expertise and project execution capabilities in emerging markets.(BW Online Bureau)
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Axis Bank Ltd, India's third-biggest private sector lender by assets, reported a 19 per cent increase in second-quarter profit, in line with estimates, while its bad loans remained stable. Net profit rose to Rs 1,916 crore ($295 million) for the three months to September 30 from Rs 1,611 crore a year earlier, the Mumbai-based bank said in a statement. Analysts on average had expected a net profit of Rs 1,920 crore, according to data compiled by Thomson Reuters. Gross bad loans as a percentage of total loans were little changed from the previous quarter at 1.38 per cent.(Reuters)
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