Banking / Financial News at a Glance 20.07 2020

Good Morning All... ☕ 20.07.2020: Today's Banking / Financial News at a Glance 🍒 If the economy opens up fully, chances of recovery are very good: A S Rajeev, CEO, Bank of Maharashtra : Bank of Maharashtra chief executive A S Rajeev said that the bank may tap the capital market only in FY22 due the current adverse market condition even as Reserve Bank of India Governor Shaktikanta Das advised banks to create additional capital buffers to cover the emerging stress. BoM is one of the handful of state-owned lenders which have shown positive return on assets in FY20 after a gap of three years but the Covid-19 pandemic has cast a shadow again. In an exclusive interview with ET’s Atmadip Ray, Rajeev said that pharmaceutical and FMCG have become safer bets for lending following the outbreak of pandemic. The global economy has taken a hard hit due to Covid-19. The IMF in its recently released World Economic Outlook, June 2020 has reported that the global economy is expected to contract by 4.9% in 2020, the impact would be much larger than what we have seen during the global financial crisis of 2008. Given how our economy is interlinked with the rest of the world, we are no exception to the COVID impact. The present crisis has impacted our domestic growth resulting in significant reduction in capex as well as lower discretionary spending. All this is going to impact credit off take in the near term. Going forward, as the economy opens up fully post lock down, chances of recovery are very good. The demand has started to pick up, although it is still lower than the pre-Covid levels. Moreover, at present, the agriculture sector / rural economy is likely to pick up primarily due to good monsoon expected this year. In other sectors, recovery is likely to pick up from the third quarter onwards, subject to then prevailing Covid situation. - economic times 🍒 Economic recovery might 'lose steam' due to partial lockdown: HDFC Bank's Aditya Puri : HDFC Bank Chief Executive Officer (CEO) Aditya Puri said the economic recovery seen in May and June might "lose steam" due to partial lockdowns imposed due to a surge in COVID-19 cases. In July, many states have reimposed restrictions or enforced complete lockdowns in certain cities and districts."Rural economy seems to have been relatively isolated from the virus. There was too much pessimism around. In response to high frequency indicators… there was marked improvement in May which sustained in June," Puri said, as quoted by The Indian Express. The HDFC Bank CEO and Managing Director made the comment at the company's Annual General Meeting (AGM) on July 18. "The robust rabi crop and satisfactory progress of khariff crop has manifested in healthy income in the hands of the farm sector. However, there could be moderation in demand going forward," Puri added. HDFC Bank on July 18 reported a standalone profit of Rs 6,658.62 crore for the June quarter, a 19.6 percent year-on-year growth.Puri, who retires in October, also spoke about the appointment of the lender's next head. "There has been a lot of talk about the successor not being with us for a long time. Our potential successor has been with us for 25 years. My successor was always in place, at least in my mind. It is now for RBI to decide," Puri said, as quoted by CNBC-TV18. - moneycontrol.com 🍒 Canara Bank to raise up to ₹5,000 cr equity capital in FY21 : State-run Canara Bank will raise up to ₹5,000 crore equity capital through various modes in the current fiscal year to boost its capital adequacy ratio in view of expansion plans, and will seek nod from shareholders for the same in its AGM next month. In view of certain expansion plans of the bank, the implementation of Basel III norms, and consequent capital charge, there is a need to increase the capital to further strengthen the capital adequacy ratio, Canara Bank said in its annul report for 2019-20.The bank will seek shareholders' nod at the annual general meeting (AGM) to be held on August 10 through audio/visual means in view of the coronavirus pandemic.The Bengaluru-headquartered lender, which amalgamated Syndicate Bank into itself with effect from April 1, 2020, has ₹1,030.23 crore as equity capital currently and its capital adequacy ratio stood at 13.65 per cent as on March 31, 2020, well above the regulatory requirement of 10.875 per cent. "In order to shore the bank's tier I capital, the Board of Directors of the bank have decided to raise capital to the extent of ₹5,000 crore through various modes including Follow-on Issue, right issue, preferential issue to government and financial institutions, Qualified Institutional Placement (QIP) and other permitted mode of raising capital," Canara Bank said in the annual report for FY20. - Live mint 🍒 HDFC Bank gets shareholders’ nod for raising ₹50,000 cr via debt : Shareholders of HDFC Bank have approved to raise up to ₹50,000 crore through bonds to enhance capital base to fund its business growth. The decision to this effect was taken in the Annual General Meeting concluded on Saturday. “Approval of shareholders was obtained for the issue of unsecured perpetual debt instruments (part of additional tier I capital), tier II capital bonds and long term bonds (financing of infrastructure and affordable housing) on a private placement basis of an amount in aggregate not exceeding ₹50,000 crore,” HDFC Bank said in a regulatory filing on Sunday. - Business Line 🍒 Credit demand, repayment to pick up by September: Bandhan Bank CEO : Bandhan Bank is expecting a 15-20 per cent growth in credit offtake in FY21 backed by a steady pick up in demand. Chandra Shekhar Ghosh, Managing Director and CEO, Bandhan Bank, said that the credit demand, which is generally muted in the first two quarters of a fiscal, starts picking up in the third quarter. But even in the first quarter (April-June 2020), the bank managed to disburse advances of around ₹3,116 crore.The bank’s total advances grew by 18 per cent to ₹74,331 crore as on June 30 this year as against ₹63,164 crore recorded in the same period last year. “From credit demand and repayment point of view, things are clearly normalising and are expected to further normalise by September-October this year. Credit demand typically starts picking up around the festive season now we need to see how the festive season turns out this year,” Ghosh told BusinessLine. With a capital adequacy ratio of 26.53 per cent, the bank is comfortable on the capital front and has no immediate plans of raising capital. - Business Line 🍒RBI's stance on AT1 bonds may deter investors : The Reserve Bank of India's stance that Yes Bank’s Additional Tier 1 bonds and subsequent write-offs are investments gone bad may act as a deterrent for fund managers and investors from investing in new issuances, especially those of mid-sized lenders with weak capital buffers. They fear that if a bank’s capital falls below regulatory levels, these bonds could be written-off putting their investment at risk. In the Yes bank episode, investors saw more than ₹8,000 crore of their investments written off even though the bank had the option of converting the amount in full or part into fresh equity. The Reserve Bank of India (RBI) in an affidavit, in Madras high court earlier this month, had said these bonds carry higher interest rates in lieu of risks and that these can be written off. "Investors in AT1 bond would need to brace for such a complete write-off of investment especially in those of smaller-sized banks. So it is unlikely we would subscribe to fresh issuances," said a fund manager declining to be named. - Live Mint 🍒 Next MD and CEO of HDFC Bank likely to be an internal candidate : The next Managing Director and CEO of the country’s largest private sector lender, HDFC Bank, is likely to be an internal candidate. This could possibly be long-time veterans Kaizad Bharucha, Executive Director, HDFC Bank and a member of its Credit Approval Committee or Sashidhar Jagdishan, Group head and change agent at the private sector lender.The bank’s current MD and CEO, Aditya Puri, who retires in October cleared the air on succession plans on Saturday and said that his successor has been with the private sector lender for the last 25 years. “My successor was always there, at least in my mind. It is now for the Reserve Bank of India to decide,” he said at the annual general meeting of the bank. t an analyst call on the bank’s first quarter earnings, Puri underlined that the possible successors have been with the lender for a long time. “The main successors, irrespective of where the RBI finger points, have been with me, they understand the business, they have been part of the transformation, they were part of the training…there is no issue on who is the successor,” he said. - Business Line 🍒 Bank employee unions presses again for 5 day-working week, says Covid threat is haunting bankers : Bank employee unions have again raised their demand for a five-day working week, stating that reducing the number of working days would help bankers who are at high risk of contracting the coronavirus disease due to their exposure to public. The Indian Banks’ Association (IBA) in January had rejected the unions’ proposal for a five-day working week but offered a 19 per cent pay hike to employees. At present, banks have holidays on the second and fourth Saturdays every month and on every Sunday. The All India Bank Employees Association in a statement said that the coronavirus threat is haunting bankers, where they are highly exposed to the general public dealing and now a five-day week is the requirement of the hour. The association noted that while whole world is carving for four-day working, the country is still looking for a way to opt for five-days banking. Talking to PTI, the president of All India State Bank Officers Federation, Deepak Sharma, said, “Moreover, it will also be a positive step in the direction of Digital India in conformity with PM’s vision. “The working conditions in the Banks have been strenuous. Poor infrastructure, lack of adequate staff has made the officers work till late in the night, resulting in poor health, huge pressure on the officers, which culminates in serious work-leisure mismatches, life style diseases and of late, repeated acts of suicides being committed by the officers of the Banks.” Officers are called upon to work on holidays and Sundays, frequently disrupting the personal life, Sharma claimed. - Financial Express 🍒 Bank unions write to Maharashtra CM to notify first, third Saturdays as public holidays to control Covid-19 spread : Trade unions in the banking sector have requested the Maharashtra government to notify the first and third Saturdays of the month as public holidays under the Negotiable Instruments (NI) Act to protect bank employees and customers from the raging Covid-19 pandemic. In this regard, the United Forum of Bank Unions (Maharashtra) has drawn the attention of Chief Minister Uddhav Thackeray to the Karnataka and Kerala governments who have alredy notified the first and third Saturdays as public holidays under NI Act to control the rush at branches. The Forum’s Convenor, Devidas Tuljapurkar, wrote a letter to Thackeray requesting to consider issuing a notification for the same on the lines of what the Karnataka and Kerala governments have done. Currently, bank branches across the country are closed on second and fourth Saturday and all Sundays. - Business Line 🍒 HDFC Ltd appoints record 19 merchant banks for mega Rs 14,000-crore fund raise : India’s largest private sector mortgage financier Housing Development Finance Corporation (HDFC ) Ltd has finalised a legion of as many as 19 merchant banks for its fundraising exercise aimed at raising up to Rs 14,000 crore and bolstering its balance sheet, multiple sources with knowledge of the matter told Moneycontrol. This is arguably the biggest consortium of merchant bankers/advisors ever taken on board by an Indian corporate for fundraising purposes in the equity capital markets and sets a new record for India Inc, these sources said. Moneycontrol was the first to report the finance powerhouse’s fundraising plans on June 17, 2020. “Morgan Stanley, Kotak Mahindra Capital, Bofa Securities, Jefferies, JP Morgan, Citi, Nomura, HSBC Securities, BNP Paribas, Credit Suisse, UBS, Goldman Sachs, SBI Capital, ICICI Securities, JM Financial, Motilal Oswal, Axis Capital, HDFC Bank and IIFL Capital are the 19 merchant banks which have been shortlisted by HDFC Ltd,” said an individual familiar with ongoing deliberations. Three other individuals confirmed the names and quantum of the merchant bankers. - moneycontrol.com 🍒 HDFC Bank's Aditya Puri highest paid banker for FY20 with Rs 18.92 crore in remuneration : HDFC Bank Managing Director Aditya Puri has emerged as the highest paid banker among the top lenders for FY 2019-20, with a 38 per cent jump in salary and prerequisites to Rs 18.92 crore. Puri, who built the bank into the largest by assets in the private sector and also the most valued one by investors over the last 25 years, earned an additional Rs 161.56 crore by exercising stock options during the year, the bank's annual report said.The banker, who is set to retire in October this year on attaining the age of 70, had earned Rs 42.20 crore by exercising stock options in 2018-19. Its group head and "change agent" Sashidhar Jagdishan, who is reported to be among the selected candidates to succeed Puri, earned a salary of Rs 2.91 crore in FY20, as per the annual report. - economic times 🍒Covid-19: Spike in health insurance claims expected to normalise by September : The general insurance industry is likely to witness a spike in health insurance claims primarily coming from Covid-19 related illnesses. However, the increase in claims arising out of the Covid-19 virus would get balanced by the non-Covid claims as more and more people are avoiding hospitalisation. Mahesh Balasubramanian, MD and CEO, Kotak General Insurance, said that there has been a general spurt in claims with the Covid-19 cases doubling rapidly. However, the situation is expected to normalise by September and claims would come down to pre-Covid levels. “People are staying away from hospitals for all kinds of optional surgeries so claims are lower there so the increase in Covid claims is being balanced by the non-Covid claims. I expect the situation normalising by August-September and we should be back to pre-Covid levels in terms of claims,” said Balasubramanian. - Business Line 🍒 Gold imports dip 94 pc in April-June to USD 688 million, narrows India's trade deficit : Gold imports, which have a bearing on the current account deficit (CAD), plunged 94 per cent to USD 688 million (about Rs 5,160 crore) during the first quarter of 2020-21 due to a significant fall in demand in the wake of the COVID-19 pandemic, according to data from the Commerce Ministry. Imports of the yellow metal stood at USD 11.5 billion (about Rs 86,250 crore) in the corresponding period of 2019-20. Similarly, silver imports during the quarter too dipped 45 per cent to USD 575 million (about Rs 4,300 crore). - economic times 🍒 Next 10 years will be India's golden moment in key sectors, says Silicon Valley venture capitalist : The next 10 years is going to be India's "golden moment" in key sectors like technology, pharmaceutical, e-commerce and manufacturing, said a top venture capitalist from Silicon Valley, pointing at the USD 20 billion foreign direct investment in the country amidst the coronavirus outbreak. "Coronavirus is sweeping the world, especially the US and India. In spite of that, the amount of investment going into India is mind-boggling," Silicon Valley's top venture capitalist, entrepreneur and philanthropist M R Rangaswami told PTI in an interview.- economic times 🍒 Demand for currency could rise despite digitisation finds RBI study : A Reserve Bank of India (RBI) staff study has found that demand for currencies rises in a low interest rate environment and falls when the rates are high. As a result, the country will have to adjust with higher currency in circulation in the coming days despite higher acceptance of digital transactions. According to the latest RBI data, the value of card and mobile payments of Rs 10.57 trillion was more than ATM withdrawals of Rs 9.12 trillion in the fourth quarter of fiscal 2018-19, for the first time ever. In the months of lockdown, the gap may have widened even further as people did not want to touch public ATM machines for fear of contracting virus, say experts, but cash could be back in vogue once the situation normalises. - economic times 🍒 In a business overhaul, Edelweiss goes asset-light as it turns focus on retail lending : In a drastic business overhaul, the Edelweiss Group will be completely exiting the wholesale credit business by 2022, shifting its focus solely to retail credit along with asset and wealth management verticals. Since the IL&FS bankruptcy-induced liquidity crisis in the shadow banking sector in September 2018, the group has been reducing its wholesale loan book and it is down 43 per cent from peak in FY18. The group will be selling down Rs 3,000 crore more of wholesale loans by March and completely exiting by 2022, says group chairman and chief executive Rashesh Shah.Wholesale lending has been the mainstay for the 25-year-old group for long, bust since IL&FS pulled down the whole industry, quantum of sticky loans, mostly extended to commercial realty, ballooned forcing it to re-align the focus now. The group also reported its maiden losses in the March quarter 2020, booking a whopping Rs 2,245 crore in net losses as it made a Rs 900-crore additional one-time provision towards the pandemic taking the total provisions to Rs 2,549 crore. - economic times. Have a Good day..