Opaque disclosures hurt govt banks' valuations-Business Standard-30.01.2015
Though market conditions are conducive, most PSBs aren’t keen to tap the capital markets, primarily due to low valuations.
On Tuesday, the State Bank of India (SBI) board approved equity capital-raising of Rs 15,000 crore, though the bank hasn’t disclosed the timing of the fund-raising yet. The approval is valid for a year.
The Bank Nifty, the benchmark banking index, has doubled in the past year, outperforming the overall indices. Some private banks have seen their valuations double. However, barring a few, most PSBs have failed to reap the benefits of the bull run.
Both chief executives of these banks, as well as the government, have cited low valuations as deterrence to tapping the capital markets. The Reserve Bank of India (RBI), too, said capital-raising by public sector banks other than through capital infusion by the government faced challenges because of the relatively low valuations of these entities, compared to their private peers.
Why are investors not buying the PSB story? The dismal financial health of these entities isn’t the only reason. Analysts say the opaque nature of discloses might well explain the lack of investor appetite.
“Public sector banks are in a vicious cycle — they need to raise capital, but they are trading at less than book values, which implies capital-raising will be book value-dilutive in nature,” says Saday Sinha, an analyst with Kotak Securities.
Market participants say banks are unable to provide consistent estimates of certain crucial parameters that reflect headwinds to earnings, such as slippages from restructured assets and restructuring asset pipeline.
For investors, slippages on the restructured assets front are a concern. These have risen sharply in the past two quarters and are out of sync with the projections of bank managements. Restructured asset pipelines, too, have often been at variance with estimates.
According to RBI data, stressed advances in the banking system increased to 10.7 per cent of total advances in September 2014 from 10 per cent in March 2014. “At 12.9 per cent of total advances in September last year, PSBs continued to record the highest level of stressed advances; private banks recorded 4.4 per cent,” RBI said in its latest Financial Stability Report.
And, worries related to non-performing assets (NPAs) are far from over. “As far as NPAs are concerned, these banks are still not out of the woods. There could be some front-loading of restructuring assets during the fourth quarter, as the regulatory forbearance they enjoy won’t be there from April 1, 2015,” Sinha said.
RBI has mandated banks have to make provisioning for restructured assets in line with sub-standard assets — 15 per cent compared with the current five per cent.
According to RBI, Indian banks are expected to remain under pressure on account of additional requirements towards capital conservation buffers, countercyclical capital buffers and supervisory capital.
In addition, delay in appointments to senior management posts has hampered decision-making at PSBs. While the government appointed the chief executives of four banks last month, the top positions at four others, including Punjab National Bank, Canara Bank and Bank of Baroda, remain vacant.
“When a bank is going to investors for raising equity, the absence of a chief executive sends a wrong signal,” said a senior official at a PSB.
What is your view of the Modi Government’s decision to split the Chairman-cum-Managing Director post in banks?
PSU banks’ NPAs rise to Rs 2.16 lakh cr-The Statesman 30.01.2015
Mumbai, 29 January: The non-performing assets of nationalised banks increased sharply from Rs 9,190 crore in 2011-2012 to Rs 2,16,739 crore in 2013-2014, according to the Reserve Bank of India.
Former journalist Mr Ketan Tirodkar obtained this data from the Central bank under the right to information.
Mr Tirodkar has filed a public interest litigation in Bombay High Court seeking a CBI investigation into what he terms “an NPA scam”.
The High Court had, in March last year, directed the CBI to inform what action it had taken against 140 cases of fraud registered by the RBI in connection with the NPAs of nationalised banks
My Comment on above news is as follows:
This refers to quarterly result of a few PS banks booking lesser profit and greater NPA in quarter ended December 2014 compared to past quarters. Keeping in view NPA position of banks, , CMD of Andhra Bank has also expressed his opinion candidly in an interview that position of banks is not likely to improve very soon and Achhe Din are yet to come. His has to retire very soon and hence some clarity has come out.As long as top officials are in service , their one and only one duty is to please ministers willingly or unwillingly.
They promise every quarter that bank's Balance Sheet will improve from next quarter as Previous Prime Minister Mr. Manmohan Singh used to say on price rise issue. When people used to cry on rising price, he used to tell them that situation will ease from next quarter. He used to dilute the intensity of angry people by saying that economy of the country is in control and in good condition and all possible efforts are being taken to contain rising prices.
Similarly in Public sector banks, Non Performing Assets has been rising every quarter and it will continue to rise quarter after quarter. And after bad quarterly result, CMD of each bank says that bad debts will be contained from next quarter and soon they will improve.
In one quarter they somehow or the other manage the data but in next quarter they declare some bad debts. This hide and seek policy has been in play since long. In every quarter , some bank will declare bad debts and book lesser profit or loss and in next quarter some other bank will book greater profit and improvement in NPA position. This vicious circle will never end. NPA of PS banks have crossed two lac crore in March 2014 and will undoubtedly cross 5 lac crore in March 2016 if RBI does not change the policy of NPA and that of restructuring to please Crying CMDs and to please Modi Sarkar who are building pressure for more and more lending .
In my view , no power on earth can stop rising trend in NPA without manipulation or without changing the norms of NPA. I have been of this view for last several years and I may be termed as negative minded by extremely positive minded person or by Yesman of the system. But sooner or the later reality precipitates and surfaces out in open.
We have seen the fate of many banks in the past , not only weak banks but also so called strong banks. I do not blame United Bank or Uco Bank or Central Bank or Allahabad Bank, Indian Bank or Indian Oversea Bank. Even banks considered as strong banks like SBI, PNB, Union, Oriental bank are gradually exposing their hidden sins. A bank used to be strong not because of inherent quality asset but due to clever mind of top officials of that bank who had so many fraudulent tools to conceal bad assets quarter after quarter. This is why , many times bad result comes out only after retirement of a Clever CMD. This has happened in SBI, PNB, Union Bank, Oriental, United , Central Bank, Indian Bank , IOB , Vijya Bank and other banks so many times.
Unfortunately neither RBI nor Ministry of Finance ever took the trouble to know why and how a CMD conceals Bad debts and how another declares it after former retires . Even if some audit is carried out for doing some SHOW business, the auditors is so chosen that he or she submits favourable report or the bad report if submitted is put under carpet to save top officials of the bank who have very excellent relation with top RBI officials or politicians. System has been bad since long. It is not that a few top officials are corrupt , but the corrupt officers at top post one after other has damaged the entire system and there is none to change the system. Now corruption has become the system and the culture of the bank. Good officers in such case avoid taking promotion or taking higher responsibility and bank thus run by mostly bad officers or inexperienced officers.
The reign of flatterers and bribe earners is not going to end as long as drastic steps are not taken to correct the culture from its source , from its origin and until a few from each bank are punished ,irrespective of the fact that he is in service or retired. Message of good or bad governance percolates down from top and not goes up from bottom. Unfortunately for every fault of top officials or ministers , blame goes to juniors and sometimes to middle management officials who had little role either in sanction of loan or in monitoring of loan or in account turning bad.
It is bad luck that inspecting, auditing, vigilance and all Regulating agencies are birds of same feather and hence they all avoid taking any punitive action against erring officials and try to pass the time or postpone taking decision on files related to corrupt officials. Actions are taken against some officers who do not have any Godfather backing him. There is deep rooted and strong unity among bad officials in all organisations specially in banks where good officials treat it better to keep mum and remain away from mainstream.
FE Best Banks awards: When the going gets tough, these people get going-Financial Express
It was a tough year, one that most banks would not like to recall — a time when the economy had slipped into a slowdown, quality assets were scarce and more loans were turning toxic. But amidst the gloom of 2012-13, a few banks showed they could rise to the task and come through with flying colours.
And it’s to these eight banks that The Financial Express will raise a toast on Friday. Giving away the FE Best Banks awards at a glittering ceremony in the country’s financial capital will be Jayant Sinha, union minister of state for finance. Also present on the occasion will be Maharashtra chief minister Devendra Fadnavis.
The FE Best Banks awards are the most coveted in the banking space with banks vying with one another to own one. For 2012-13, HDFC Bank walked away with the prize in the new private sector banks category while Bank of Baroda (BoB) was at the top of the heap in the public sector banks category.
HDFC Bank also picked up a couple of awards for profitability and efficiency. As always, Aditya Puri, managing director, accepted the announcement with his usual equanimity. “We’re more optimistic now than ever before about the future,” Puri remarked.
Ranjan Dhawan, executive director, BoB, told FE his bank was highly honoured to be recipient of the Financial Express award.
Ravneet Gill, chief executive, Deutsche Bank, adjudged the winner among foreign banks, said he was delighted to win an award from a publication as highly admired as The Financial Express. “The award is a recognition of Deutsche Bank’s sustained and unwavering focus on clients, product innovation and principled growth,” Gill said.
Rana Kapoor, MD & CEO, Yes Bank, runner-up among new private sector banks, endorsed the prestige the survey carries with it. “Yesbankers are pleased to win this coveted recognition from The Financial Express which reinforces Yes Bank’s growing stature as a leading Indian private sector bank,” Kapoor said.
HS Upendra Kamath, MD & CEO, Tamilnad Mercantile Bank, also expressed his delight. “We are happy to receive this award from a prestigious institution like Financial Express this year as well,” Kamath said.
K Venkataraman, MD & CEO, Karur Vysya Bank, said it’s been a great honour to receive this award for the fourth year in a row. “In the tougher environment, getting continuous recognition gives satisfaction to all of us the in bank,” Venkataraman said.
The Financial Express has always taken care to ensure the survey is a fair one. Since numbers play a big part in the methodology, consultancy firm EY makes sure the weightages assigned to various parameters are relevant. Given the criteria are tough, only the very best make the cut.
Among others who rose to the challenge, this time around, are HSBC, which won for strength and soundness, BNP Paribas, which was ranked number one for credit quality, and Bank of Maharashtra, which picked up an award for growth.
Oriental Bank of Commerce Q3 net down 91.3% at Rs 19.56 crore-Businss Standard
The bank had posted net profit of Rs 224.3 crore for the October-December quarter of 2013-14, OBC said in a BSE filing.
OBC's total income rose by 7.79% to Rs 5,458.79 crore during the October-December period from Rs 5,063.98 crore in the same period last year.
During the quarter under review, the bank's provisioning other than tax and contingencies jumped by 57.75% to Rs 885.14 crore from Rs 561.1 crore in the same quarter of the previous fiscal.
The bank's gross NPAs increased to 5.43% at the end of third quarter from 3.87% in the corresponding period in the previous year.
Shares of Oriental Bank of Commerce were trading at Rs 292.70 apiece, down 6.49% from its previous close on the BSE.
Union Bank slips on poor results-Hindu Business Line 28.01.2015
January 27, 2015:
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