Friday, December 5, 2008

BANKING NEWS - AIBEA - 4.12.2008

Vijaya Bank seeks Rs 1,800 cr from Govt
Our Bureau Hyderabad, Dec. 2
Vijaya Bank has sought Rs 1,800 crore from the Government to increase its Capital to Risk Weighted Assets Ratio (CRAR) to over 12 per cent from the existing 10.41 per cent.
The Bangalore-based public sector bank is expecting response from the Ministry of Finance in about a month and is “sure of receiving additional capital”, its Chairman and Managing Director, Mr Albert Tauro, told a news conference here on Tuesday.
“Our present capital adequacy ratio is below the 12 per cent CRAR advised by the RBI for public sector banks. The additional capital will allow us to maintain 6 per cent tier-I capital up to 2011,” he said.
The Government might release the fund in tranches as there is no immediate need for the entire fund, Mr Tauro added. “The likely infusion of additional capital is in line with the Government’s decision to help some public sector banks to maintain healthy CRAR,” he said.
“After the infusion of capital by the Government, the headroom for tier-I and II capital would be improved and we will consider raising tier–II capital,” he said.
The bank’s net non-performing asset (NPA) ratio has gone up to 0.74 per cent in the second quarter of current fiscal compared with the year-ago period (0.44 per cent) due to defaults in the housing and consumer loans segment. In the first half of the current fiscal, Rs 280 crore was added to the NPA pool.
“But our business is growing and is profitable as the bank has wiped out Rs 76 crore marked-to-market loss in the first quarter during the second quarter and earned a profit of Rs 4 crore for the first half,” he said.

GM to slash up to 31,500 jobs in US
General Motors told lawmakers that it plans to cut up to 31,500 more jobs in the US, as it confronts a severe slump that has it begging Congress for a $ 18-billion bailout.
GM said on Tuesday it planned to reduce its total US employment from the current level of 96,537 people to between 65,000 and 75,000 salaried and unionised workers by 2012.
The total number of US plants would be cut to 38 in 2012 from 47 in 2008. GM has already slashed its workforce nearly in half from the 2000 levels of 191,465 people.
The company operated 59 powertrain, stamping and assembly plants in the US in 2000. The job cuts were detailed in a report GM presented to Congress in hopes of securing government-backed, low-cost loans. GM said it expects to be “fully competitive” wit h Toyota on wage costs for “both current workers and new hires” by 2012 due to “additional changes to be negotiated” with its main union, productivity improvements, turnover rates and the planned cuts. – PTI
SBI MF’s 90-day debt plan collects Rs 1,677 cr
Our Bureau, Mumbai, Dec. 2
SBI Mutual Fund has collected Rs 1,677 crore under its latest fixed maturity plan, which closed last week, indicating that short-term FMPs are still in favour.
Significantly, this investor interest has come at a time when the total assets under management of mutual funds registering a drop.
An official with the mutual fund said the 90-day debt scheme received good response from reail investors though the larger portion of the fund came from institutional investors. He said this is the second largest amount received under the scheme, the largest being Rs 1,800 crore collected by an earlier scheme six months ago.
“The investor profile is still to be analysed, but we have seen higher retail participation this time,” said Mr Srinivas Jain Chief Marketing Officer, SBI Mutual fund.
Jefferies laying off 10 pct of employees-sources
Joseph A. Giannone and Michael Erman,NEW YORK, Dec 3 (Reuters) –
Middle market investment bank Jefferies Group Inc (JEF.N: Quote, Profile, Research,Stock Buzz) began laying off employees Tuesday as part of plans to slash 10 percent of its workforce worldwide, according to sources familiar with the situation.
Roughly 10 percent of Jefferies' 2,465 employees will be let go with the cuts hitting almost every business line. The firm had already slimmed down from 2,529 employees a year earlier.
Jefferies officials did not return calls seeking comment. Chief Executive Richard Handler declined to comment on the subject of layoffs.
The New York firm has offices in leading financial centers across the United States, the UK, Switzerland, Germany, France, United Arab Emirates, India, China, Japan, and Singapore, according to its website.
The cuts mark a turnabout for Jefferies, which as recently as October emphasized plans to continue hiring talented bankers and traders freed up by bigger Wall Street firms hit by the global credit crunch.
Fortified with capital from Leucadia National Corp (LUK.N: Quote, Profile,Research, Stock Buzz) earlier this year, the firm made a number of hires in the past few months, picking up top-tier names from Lehman Brothers and Bear Stearns.
Among others, Jefferies hired Lehman's Jason Roelke to run derivatives sales and added 25 global equity markets staffers from Bear Stearns in London. (Reporting by Joseph A. Giannone, Michael Erman; Editing by Gary Hill)
Cooperative bank staff stage dharna
Thiruvananathapuram: 4-12-2008, The Hindu
The All Kerala Cooperative Bank Employees Association held a dharna before the Secretariat on Wednesday demanding the implementation of the cooperative package as per the recommendations of the Vaidyanathan Committee in Kerala also, exemption of cooperative banks from the purview of income tax and sanctioning of pension to all the employees of cooperative banks. All India general secretary of the All India Bank Employees Association C.H. Venkatachalam inaugurated the dharna. — Special Correspondent
Public sector banks on fast track now
Priyanka Vyas, New Delhi, Dec. 3
It’s a reversal of roles. Public sector banks now have more customers knocking on their doors for auto loans than private banks, which were leading the race earlier.
The reason: public sector banks have started sanctioning auto loans at the same speed that private banks used to -- two to three days – and are offering lower interest rates as well.
The public sector banks’ change of heart seems to have come about from the huge opportunity they see as private banks go increasingly stringent in financing vehicles due to the global meltdown.
Take for instance Mr Wilfred Minz, a supervisor at Life Insurance Corporation who was out scouting to finance his Alto. He preferred to approach the State Bank of Patiala that offered him an interest rate of 12.25 per cent, while private banks rates start from 13 per cent and go as high as 18-19 per cent. Besides, it was sanctioned on a fast track. “My experience has been that despite the extensive documentation they need (public sector banks), I did not have to run around and my loan got sanctioned in just two days,” recounts Mr Minz.
Similarly, Mr Ramesh Khanna, a marketing manager, who bought a Ford Ikon last month from State Bank of India was taken aback with the public sector bank’s promptness of service.
“It was hassle-free. I could not believe that a SBI official would come even at 9 p.m. to verify my documents,” he said.
Said a dealer for Maruti Suzuki: “Earlier public sector banks were taking a week or longer to grant auto loans and private banks were doing it in two-three days. Now it is the other way around. In the earlier days private sector banks were not so stringent in lending. Even without Form 16, if the customers had two years in a stable job, the loan got sanctioned. Public sector banks have more checks. Despite this, they are now at par, or even quicker in lending."
Carmakers too seem to be increasingly betting on public sector banks with private banks cutting down on vehicle financing. “Public sector banks are lending in such difficult times. Though this can help sustain business, for growth to happen there has to be more lending," said Mr Mayank Pareek, Executive Officer, Marketing and Sales, Maruti Suzuki India Ltd.
According to a banking source, since the slowdown, ICICI Bank’s share in financing Maruti cars has dropped to about 1,100 cars a month from the 11,000 cars that it did in its hey day. In contrast, SBI’s share has grown to 14,000 units a month from around 8,000 earlier.
Hyundai too now has State Bank of India as the second largest financier for its cars. “The share of public sector banks in financing Hyundai cars has been growing despite their stringent lending norms. But there is scope for more aggression,” said Mr Arvind Saxena, Senior Vice-President, Sales and Marketing, Hyundai India.

Banking on makeovers
A few public sector banks go in for a makeover to appeal to the current generation..
We all love stories. Their appeal is universal, all the more so if they are ones that evoke emotions. The chances of such stories being remembered and retold are higher. It’s this appeal that the advertising campaigns of some public sector banks have capitalised on. Three public sector banks’ campaigns currently on air use images of children, animals and friendly strangers — images that one would normally not associate with financial services — to tell stories of what they stand for and how they have changed or wish to be seen.
Since the entry of the new-age private sector banks with their promises of faster customer service and products backed by the latest technology, the image of public sector banks in India had taken a beating. However, over the last few yeas, PSU banks have upgraded their technology. Now, they are on par with their private sector counterparts in all aspects. This is the message they hope to get across through their ad campaigns even as they put in place changes at the ground level.
For Union Bank of India, which recently changed its logo and brand, it was important to be perceived differently, says R. B. Menon, Deputy General Manager, Corporate Communications. Menon says: “In the financial services sector how you are perceived is critical because any product is commoditised very fast. Some studies had indicated that top-of-mind unaided recall was not very high for Union Bank of India. Also, in the last two years we had made a lot of changes internally, but these were not known to the world. So we felt re-branding was necessary.”
A survey conducted showed the bank was perceived as one meant for slightly older people, not for high-fliers and youth. The one positive feature was that it was seen as a trusted bank, Menon says. “But it was felt that we were never the first in anything, despite being the first to launch several products and services. We were seen as a middle-of-the-road kind of institution. We wanted to change this image,” he says.
The series of television and print commercials show various relationships, how two people who are linked to each other (as spouses, siblings, parents) can fulfil their dream. It symbolises partnership.
Similarly, the aim behind IDBI Bank’s campaign is to show how the bank, which is known more as a bank specialising in lending to big corporates, is equally concerned about retail customers and is a serious player in the consumer or retail banking space. Hence, the tagline “Not just for the big boys … banking for all.”
O. V. Bundellu, Executive Director, IDBI Bank, says, “The idea is to mention that while the erstwhile IDBI was essentially a wholesale bank for four decades, lending to many of the mid- and large corporates, now we have started retail banking, which also includes small and medium enterprises, agri-lending, trade-finance and so on.”
Union Bank’s ad uses close relationships to communicate the partnership between the bank and customers. Arijit Ray, Executive Vice-President and Head, Mumbai, Mudra, the agency which worked on Union Bank’s logo change and advertisements, says, “Out of our research it emerged that for the bank’s customers the trust factor was very critical. So, ‘partnership’ was a big factor.” The ads show how the bank is one which understands the customers and, hence, the customer is comfortable with the bank, despite the change. “That is the fundamental emotion. It captures the bank’s tagline — ‘Your dreams are not yours alone’”, Ray says.
Indian Overseas Bank’s advertisement, which depicts a little child trying to snap his fingers, in various situations — at school, in bed, in the park — is about how a little bit of personal advice given by the banker can help customers at the opportune moment. The advertisement begins with a customer walking into an IOB branch with his son. Even as his father goes about his business at the bank, the child is engrossed in trying to figure out how to snap his fingers. A friendly IOB officer shows the child how to do it the right way. Thereafter, the kid assiduously practises the action day and night. When he finally learns, the firm, resounding click helps prevent the pocket of an old man from being picked.
“Salah humaari, faayda aapka” goes the catch line, capturing the entire situational metaphor, says a note from Everest Brand Solutions, which worked on IOB’s campaign. Even a tiny bit of personal advice given by Indian Overseas Bank can help you gain financially – that’s the message that IOB’s thematic television commercial, its first ever in its 70-year old history, seeks to convey.
D. Rajappa, President, Everest Brand Solutions says, “Our studies showed that IOB is highly rated by its existing customers. This experience is what is being celebrated in the TVC.” The aim behind IOB’s new brand-building campaign was to assert and reinforce its commitment to the prosperity and well-being of its customers. The ad is, therefore, about the warmth and personal experience of a bank that has been around for over 70 years, as well as about the shared relationship of growth — true to its tagline “Good People to Grow With”.
N. Padmakumar, National Creative Director, Everest Brand Solutions, says, “IOB’s genuineness and solidity is loved and respected by its customers. The idea, therefore, was to create a commercial that would convey the message of financial prosperity, but with an aura of warmth and approachability.”
IDBI Bank’s commercial, created by Ogilvy & Mather, has a few boys playing football in a forest-like setting, when an elephant comes out of the thicket. Scared, the boys run away. It happens the second time too. But this time the big elephant steps aside and slowly draws out a little elephant, which then joins the boys in their games, while the parent watches on. “IDBI was considered a big elephant lending to the big boys in the corporate world. But now retail is also a focus area for us. That is why the baby elephant,” Bundellu says. The bank has been gradually growing its network once it got into retail banking and after acquiring United Western Bank. It hopes to grow more in the retail space.
However, there is something lacking in the commercial, which has no voice-over, only background music, he adds. “Maybe we should have explained the idea orally. But we have kept the message subtle. In addition to the television commercial, we are also doing below-the-line advertising by putting up banners in branches, speaking to customers, doing roadshows and putting up hoardings,” he adds.
According to Ambi M. G. Parameswaran, Executive Director & CEO — Mumbai, Draftfcb + Ulka, the high-profile advertising by PSU banks is a laudable effort as it acknowledges the importance of advertising and brand building.
However, the banks need to remember that brand building needs a few key ingredients: a clear definition of what the brand stands for that is unique, relevant and believable; a long-term orientation to brand building across the organisation; a service organisation where all employees live up to what the brand promises; and consistent brand building inputs. “If the banks continue this newfound enthusiasm with all these four imperatives, one will applaud their efforts. As of now, these are only flashes,” he says.

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