PNB cuts prime lending, deposit rates by 50 bps (BL, BS, ET, FE 01.11.08)
Punjab National Bank (PNB) on Friday announced a cut in its benchmark prime lending rate (PLR) by 50 basis points to 13.5 per cent. The rate cut is effective from November 1, the Chairman and Managing Director, Dr K.C. Chakrabarty, told. The revised rate will be applicable to existing as well as new borrowers, he said. PNB will also cut its peak deposit rate by 50 basis points to 10 per cent effective from December 1, he added. PNB’s decision to prune rates comes a week after the RBI cut its key lending rate for the first time in more than four years. As part of festival bonanza, the bank had, earlier this month, reduced rates on housing loans, car loans and education loans by 50 basis points. The temporary rate cut would now become permanent with the announced reduction in the PLR, he said. Announcing the second quarter results, Dr Chakrabarty said PNB’s net profit grew 31 per cent to Rs 707 crore while total income rose 35 per cent to Rs 5,313.18 crore for the quarter under review. For the six-month ended September 30, PNB reported a 27-per cent jump in net profit at Rs 1,219.50 while total income rose 28 per cent to Rs 9,907.80 crore. The bank’s second quarter interest income rose 33 per cent to Rs 1,712 crore. Dr Chakrabarty said PNB expects profit growth of 25 per cent during the current fiscal (2008-09) and a loan growth of 20-22 per cent, despite the current turmoil in the financial markets. Total business increased by 25.96 per cent to reach Rs 3,16,747 crore as on September 30. Total deposits increased to Rs 1,86,315 crore while advances improved to Rs 1,30,432 crore.
Syndicate Bank trims bulk deposits (BL, BS 01.11.08)
Public sector Syndicate Bank reduced its bulk deposits by Rs 1,055 crore on year on year basis in a bid to bring down the cost of working funds. Chairman and Managing Director of Syndicate Bank, Mr George Joseph, said: “The bank has taken a conscious decision to shed bulk deposits and focus on raising its core deposits. Bulk now comprised less than 33 per cent of our overall deposits.” Core deposits that included current and savings accounts were Rs 62,750 crore in the second quarter of 2008-09. Gross deposits during the period were Rs 95,756 crore. Despite the reduction in bulk deposits, Syndicate Bank’s cost of working funds hardened to 6.89 per cent in Q2 this year, up from 6.65 per cent the corresponding period of the last year. Mr Joseph said that during the same period the bank was able to re-price some of its assets. “We are now in a sellers market and therefore at an advantage,” he said. Re-pricing some short-term assets pushed up the interest earnings by as much as 5 per cent, he said. The re-pricing pushed up its average yield on assets to 10.78 per cent up from 10.51 per cent for the period. As a result, interest earnings rose to Rs 2,369.95 crore in Q2 this year, up from Rs 1,938.60 crore during the corresponding period last year. The improved interest offset the reduction in other income that included treasury operations. Other income dropped to Rs 157 crore in Q2, down from the previous year’s Rs 216.40 crore. Syndicate Bank’s net profit consequently improved to Rs 261.91 crore in Q2, up 15 per cent over the corresponding period of the last financial year.
Interest income drives Andhra Bank net up (BL, BS, ET 01.11.08)
Andhra Bank’s net profit increased 6.8 per cent at Rs 161 crore in the second quarter ended September 30, 2008 compared with Rs 151.2 crore in the corresponding quarter of the previous financial year. A 33 per cent increase in the net interest income, among others, drove the bank on the path of profitability in “a very, very trying period,” Mr R.S. Reddy, Chairman and Managing Director of Andhra Bank, told. “Our operating profit grew at a strong 19.9 per cent to Rs 278.4 crore which shows the sound business,” he said. The Hyderabad-based bank would have posted higher net profit except for a higher provisioning of Rs 56.89 crore (Rs 11 crore in the year-ago period) for other than taxes and contingencies. “This included Rs 12.67 crore for depreciation on the Government securities Available for Sale (AFS) and for the non- performing assets,” Mr Reddy said.
UCO Bank Q2 net rises 36% (BL, BS, ET 01.11.08)
Backed by a good recovery from written off accounts and an increase in net interest income, UCO Bank has posted 36 per cent growth in net profit at Rs 150 crore for the quarter ended September 30, 2008, up from Rs 110 crore during the corresponding quarter last year. Net profit for the first half increased by 17 per cent at Rs 284 crore (Rs 243 crore). “The increase in net profit is mainly on account of better NPA management and increase in NII,” said Mr S.K. Goel, Chairman and Managing Director, UCO Bank. The bank recovered Rs 36.68 crore from written off accounts during the quarter under consideration. Net non-performing assets of the bank declined to 1.61 per cent (2.26 per cent). Net interest income during the quarter grew by 16 per cent at Rs 412 crore, against Rs 356 crore. Net interest margin was at 1.9 per cent. Capital adequacy ratio was at 10.25 per cent. Total business grew 20 per cent to Rs 1,41,397 crore (Rs 1,17,994 crore). Deposits grew by 17 per cent to Rs 82,019 crore (Rs 70,292 crore), while advances grew by 24 per cent to Rs 59,378 crore (Rs 47,702 crore). “Our focus is on low cost CASA deposits. We would want CASA to constitute 35 per cent of total deposits,” Mr Goel said. There might not be any immediate revision in interest rates on advances and deposits, he said.
Cabinet nod for UCO Bank capital rejig (BL 01.11.08)
The Union Cabinet has approved the capital-restructuring plan of UCO Bank by converting Rs 250 crore equity into preference shares. “The reduction in the pure equity capital will improve the earning per share and other financials so that the bank will have a more attractive capital structure if and when it approaches the capital market,” the Union Finance Minister, Mr P. Chidambaram, said. He did not provide a schedule for the conversion. UCO Bank has an equity capital of Rs 799.36 crore.
United Bank hikes deposit rates (BL 01.11.08)
United Bank of India has increased interest rates on term deposits by 100 basis points effective November 1. The revised rates on a term deposit of two-to-less than three years stand at 10.5 per cent (9.5 per cent). Rates on deposits in the time bucket of 30-90 days and 91-179 days have been revised by 100 basis points at 7 per cent and 8 per cent respectively. Senior citizens will earn 11 per cent interest in the one-to-less than three years time bucket. The bank has also revised interest rates payable to the period of three-to-less than five years at 9.75 per cent and for five years and above at 9.25 per cent. Senior citizens would earn an additional 0.50 per cent more on these periods.
Low market volumes dent Kotak Bank net (BL, BS 01.11.08)
Kotak Mahindra Bank’s net has dropped 36 per cent to Rs 47.86 crore for the quarter ended September 2008 against Rs 75.38 crore during the corresponding quarter of 2007-08. Its consolidated profit after tax also slipped to Rs 161 crore (Rs 241 crore). Its Chief Financial Officer, Mr Jaimin Bhatt, attributes this drop to the downward slide in market volumes compared to the earlier quarter. ‘We have done reasonably well in lending business, but registered a big drop in capital market-related activities. We completed one full quarter without an IPO from Kotak,’ he said. While admitting this significant change, he said that the bank would look at areas other than IPO-related business to grow such as mergers and acquisitions and private equities, as it saw huge business potential in this space.
Reliance Cap standalone net slips 3% (BL, BS, FE 01.11.08)
Reliance Capital, on Friday reported a three per cent dip in its standalone net profit for the quarter ended September 30, 2008 as higher interest costs and expenditure drove down profitability. Net profit dipped to Rs 195 crore for the quarter, from Rs 201.2 crore in the same year-ago quarter, despite the total income of the company rising 73 per cent to Rs 675.72 crore from Rs 391.27 crore. Profits were dented due to higher interest outgo, which at Rs 288 crore (Rs 53.5 crore), was four times higher from a year ago. The profits from its finance and investments segment dipped, to Rs 225.15 crore (Rs 234.93 crore), while the profits from the smaller consumer finance segment increased to Rs 14.31 crore (Rs 5.96 crore). The company’s expenditure increased 54 per cent during the second quarter of the current fiscal. It increased to Rs 154.28 crore from Rs 100.06 crore in the corresponding year ago quarter. The consolidated net profit for the quarter ended September 30, 2008 increased 15 per cent to Rs 229.42 crore (Rs 200.07 crore).
Srei Infra Fin net declines (BL 01.11.08)
Srei Infrastructure Finance Ltd reported a total operating income of Rs 243,92 crore in the quarter ended September 30, 2008 against Rs 162.46 crore in the corresponding period in the previous year. Net profit, however, declined to Rs 26.18 crore during the quarter from Rs 33.18 crore in the second quarter of 2007-08.
NBFCs can raise short-term foreign currency loans (BL, BS, FE 01.11.08)
Non-Banking Financial Companies (NBFCs) have been allowed to raise short-term foreign currency loans to help them meet their short-term liabilities. On Friday, the Reserve Bank of India said, as a temporary measure, non-deposit taking NBFCs have been permitted to raise short- term foreign currency borrowings, under the approval route. NBFC can borrow up to 50 per cent of their Net Owned Funds or $10 million (or its equivalent), whichever is higher for a maximum period of three years. The all-in-cost ceiling should not exceed 6 months Libor + 200 bps (for the respective currency of borrowing or applicable benchmark). The borrowings should be fully swapped into rupees for the entire maturity. The borrowed funds should be used only for refinancing of short-term liabilities and no fresh assets should be booked out of the resources, RBI has stipulated.
Cabinet okays hike in FDI in insurance to 49 pc (BL, BS, ET 01.11.08)
The Union Cabinet has given its approval for the introduction of the Insurance (Amendment) Bill, 2008 to increase the upper cap of foreign direct investment from the current 26 per cent to 49 per cent. Mr P. Chidambaram, however, told that the Bill was unlikely to be passed by the present Lok Sabha due to lack of time. The Cabinet also decided to introduce the Life Insurance Corporation (Amendment) Bill, 2008. “This is one short bill that raises equity from Rs 5 crore to Rs 100 crore,” Mr Chidambaram said. The insurance industry has welcomed the move.
FII buying lifts markets (BL, BS, FE 01.11.08)
Stocks rose on Friday as foreign institutional investors turned net buyers after a straight fortnight of fierce selling. FIIs were net buyers of Indian equities for Rs 1,237 crore on Friday, while domestic institutions were net sellers for Rs 116 crore. The Sensex was up 743.55 points or 8.22 per cent to close at 9788.06, and the broader Nifty was up seven per cent at 2,885.6. “The major reason for the rally was the rate cut that happened in the US followed by interest rate cuts in China, Taiwan, Hong Kong and Bank of Japan. Another reason for the rally was the domestic inflation level, which came down to 10.68 per cent,” said Mr Alex Mathew, Head of Research at Geojit Financial Services.
Stocks lent by FIIs among the worst affected in slide (BL 01.11.08)
The stocks in which foreign institutional investors have lent the most quantity of shares overseas are also among the worst affected in the recent stock market slide. SEBI on Friday issued on its Web site a list of the position of Indian securities lent overseas by FIIs as on October 9, 2008. But analysts and market watchers are not sure that FII lending in these securities could be in large part responsible for this. “It is possible that these stocks were just the most actively transacted in the market in every way. If you look at the cumulative volumes lent by FIIs, they form a very small proportion of monthly volumes,” said one broker. It would also be difficult to correlate the volumes lent overseas and the market fall in individual stocks because SEBI figures give the cumulative position as on October 9. SEBI had recently told FIIs to reverse their lending positions and also that it disapproved of such lending and borrowing activity.
Forex reserves fall $15.5 b (BL, ET, FE 01.11.08)
The foreign exchange reserves shrunk by $15.47 billion - the largest fall in a week - to $258.41 billion for the week ended October 24. The reserves had dropped by $118 million to $273.89 billion in the previous week. The forex kitty has been depleting for the last few months with foreign institutional investors resorting to heavy selling in the equity market and the RBI trying to save the falling rupee. In October alone, forex reserves have fallen by a total of $33.4 billion. As per SEBI data, FIIs sold a total of Rs 2,524.5 crore in equities. However, according to data from the Bombay Stock Exchange, FIIs were net sellers to the tune of Rs 3,853.42 crore in the same week. India’s forex reserves had reached its peak of $316.17 billion, during the week ended May 23, 2008.
S&P outlook on India’s long-term rating remains stable (BL, ET, FE 01.11.08)
International ratings agency Standard and Poor’s affirmed its ‘BBB-’ long-term and ‘A-3’ short-term sovereign credit ratings on India. The outlook on the long-term rating remains stable. The report by S&P said the ratings on India reflect the country’s strong economic growth prospects and its deep Government debt market, which helps accommodate its weak fiscal position. An improvement in the sovereign ratings will depend on resumed fiscal consolidation that leads to a materially lower debt and interest burden, and additional reforms that lift the country’s growth prospects and income levels. On the other hand, further fiscal slippage, a marked decline in external liquidity indicators, or policy measures that weaken economic growth prospects, could lead to downward pressure on the ratings, the report said.
J&K Bank Q2 net profit up 7.53% (BS 01.11.08)
Jammu & Kashmir Bank said its net profit grew by 7.53 per cent to Rs 115.92 crore for the July-September quarter from Rs 107.8 crore in the corresponding quarter last year. For the six months ended September 30, the bank’s net profit rose by 10.17 per cent to Rs 210.48 crore.
ING Vysya Bank Q2 net rises 2% (BS 01.11.08)
ING Vysya Bank reported a 2 per cent rise in its second quarter net profit at Rs 47 crore, thanks to a net write-back of Rs 9.8 crore in provisions and contingencies due to reclassification of a non-performing asset against a charge of Rs 21.6 crore. Total income went up 29.5 per cent to Rs 655.2 crore during the second quarter of 2008-09.
Depositors of SICB may have to give up 35% (ET 01.11.08)
A few months ago depositors of the ailing South Indian Co-operative Bank (SICB) heaved a sigh of relief when the scheme to merge the entity with the stronger Saraswat Bank was approved by the regulator. But now it has come to light that while deposits up to Rs 1 lakh are safe, those with larger amounts will have to give up a portion of their deposits. The fine print of the merger document states that Saraswat Bank’s liability will be for 65% of the erstwhile SICB’s deposits. Since deposits up to Rs 1 lakh are fully insured, they are safe as Saraswat will pay 65% of the deposit and Deposit Insurance and Credit Guarantee Corporation (DICGC) will pay the difference. But where the payout by Saraswat is more than Rs 1 lakh there is no liability on DICGC. In case of a depositor with Rs 1.5-lakh deposit, Saraswat will pay Rs 97,500 (65% of the deposit) and DICGC will pay Rs 2,500, which will take the total payout to Rs 1 lakh. But where deposits are much higher, say Rs 2 lakh, Saraswat’s 65% liability will be Rs 1,30,000 and DICGC will pay nothing since the depositor has already received the guaranteed amount.
FM, bank chiefs to discuss liquidity, rates (FE 01.11.08)
Amidst hectic pace of developments in international and domestic markets, finance minister P Chidambaram has convened a meeting of the chiefs of all public sector banks (PSBs) on Monday. Though the exact agenda is not yet known, bankers say a host of burning issues like liquidity, rate cut and capital requirements of banks will be discussed in the meeting. This is also the first formal meeting of the finance minister and bankers after RBI reduced cash reserve ratios (CRR) repo rates to boost liquidity and confidence in the system. Though banks were expect ed to follow RBI’s repo rate cut signal and reduce their prime lending rates (PLR) to give India Inc and individual borrowers some respite, none of them, except Delhi-based Punjab National Bank, have done so. Other bankers have maintained that unless the deposit rates fall they cannot reduce their rates. On Friday, Bank of India announced a hike in its deposit rates in selective category of 1 year to less than two years by between 25 to 50 basis points, effective from November 1. It is expected that bankers would demand more liquidity and repo rate cut, to cut lending rates.
Subbarao faced with changing battlefields (FE 01.11.08)
Reserve Bank of India governor Duvvuri Subbarao, in the job for two months, insists his priority is to fight inflation. The trouble is, the battlefield keeps changing. Money-market rates tumbled earlier in October after Subbarao reduced the cash reserve ratio, giving the new central bank chief room to keep benchmark interest rates unchanged in his first quarterly monetary-policy statement on Oct 24. Since then, the call rates, or the rate at which Indian banks lend to each other overnight, has more than tripled, increasing speculation that Subbarao will be forced to cut the reserve ratio again. Elsewhere in Asia, rates have declined as the Federal Reserve pledged to inject more US currency into money markets and global central banks cut borrowing costs to spur lending. Inflation in India may be easing, making Subbarao more comfortable about reducing interest rates to support growth.
Fiscal, revenue deficits cross estimates on high expenses (FE 01.11.08)
The Centre’s half yearly fiscal deficit has shot up to 77% of the full year target to Rs 1,02,654 crore. While this is a little lower than the 87.7% of the full fisc target till August, it is significantly higher than the 53.8% of the Budget estimate. The Centre’s revenue deficit too has increased to 141.9% of the Budget estimate to Rs 78,313 crore between April – September 2008. It stood at a mere 85.5% of the BE in the same period last fiscal. However it is lower than the revenue deficit of 177.4% of the BE till August. Its primary deficit has declined to a negative of 28.8% of the BE or Rs 16,953 crore, but is still higher than the negative of 104.1% of the BE during the same period last fiscal. Revenue receipts are on track amounting to Rs 2,44,898 crore or 40.6% of the BE till September end. It stood at 40.7% of the full fisc target in the first six months of 2007-08. The Exchequer collected Rs 2,02,247 crore as tax revenue – 39.9% of theBE; and Rs 42,651 crore as non tax revenue in the period.
Major rates & parameters as on 31.10.08 (BL, RBI)
Auction under RBI’s LAF
Govt. Securities (Yield)
8.24% 10-Yr 2018
7.94% 13 Yr- 2021
Rs 41,745 Cr
Rs 23,910 Cr
Rs 60 Cr
Source BL= Business Line, BS=Business Standard, ET=Economic Times & FE=Financial Express