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Saturday, May 15, 2010

SBI Q4 net down 32% at Rs 1.8K crore

KOLKATA: The country’s largest bank, State Bank of India (SBI), reported a 32% decline in its fourth-quarter net profit due to higher provisions for bad loans and a sharp increase in wage expenses even as it recorded a 38% jump in net interest income. The bank has proposed a 200% final dividend (Rs 20 per equity share) for 2009-10. It had earlier announced an interim dividend of Rs 10 per share.
Net profit for the quarter ended March 2010 stood at Rs 1,867 crore against Rs 2,742 crore in the year-ago period. SBI will have to make a provision of Rs 1,800 crore towards bad loans during the quarter as it booked fresh slippages worth Rs 674 crore. Fresh slippages for the entire fiscal stood at Rs 11,843 crore. The bank, however, improved its NPA provision coverage to 59.23% from 56.98% a year ago.
The results were below analyst expectations. A Reuters poll of analysts had forecast a 3% rise in net profit to Rs 2,822 crore on net interest income of Rs 6,486 crore. The bank’s share price fell 4% to close at Rs 2,222 on the Bombay Stock Exchange on Friday. Although the quarterly net profit dipped, the bank’s core parameters are doing quite well. It has provided aggressively for non-performing assets (NPAs), which will strengthen fundamentals.Bank to improve performance in next 2 years.The bank is expected to improve its performance in the next two years, said Vaibhav Agrawal, a banking analyst with Angel Broking. SBI’s net interest margin (NIM) improved to 2.66% as on March 2010 from 2.30% a year ago and its chairman OP Bhatt expects NIM to improve further as it focuses on low-cost current and savings bank deposits. Its total income grew to Rs 22,474 crore (Rs 22,061 crore).Mr Bhatt attributed the dip in profit to a variety of reasons, including a liquidity overhang in the bank, additional provisioning towards pension payment and NPAs, and a fall in treasury income. Yet, the country’s largest bank aims to grow its lending by 21-22%. “We do expect a higher growth rate in future as some of our loan products are doing well and our new marketing strategy (has) started paying off,” he said on Friday. The bank has a capital adequacy ratio of 13.39% to leverage for lending growth. “We still have enough capital but will look to raise Rs 15,000-20,000 crore via equity this fiscal without diluting the government’s share from 59%,” Mr Bhatt said. It is discussing the possibility of a rights issue with the government to this end.But, at present, what bothers SBI the most is its idle cash pile of around Rs 40,000 crore. The bank plans to go slow on deposit mobilisation till June-July this year to correct the situation. For the full financial year 2009-10, the bank reported a net profit of Rs 9,166 crore, almost flat compared with Rs 9,121 crore in 2008-09. Total income for the year rose to Rs 85,962 crore (Rs 76,479 crore).The bank has crossed a business mix of Rs 14,45,596 crore, including advances of Rs 6,41,480 crore and deposits of Rs 8,04,116 crore. Its market share in advances improved to 16.28% as on March 31, 2010, from 15.99% a year back. Its share in deposits, however, fell to 16.31% from 17.70% a year ago. SBI’s gross NPA ratio as on March 31 deteriorated to 3.05% from 2.86% because of fresh slippages but net NPA improved marginally to 1.72% (1.79%) as it made higher provision.

Monday, May 10, 2010

Rising dollar catches banks on wrong foot

Greek woes forced bankers in London and Singapore to stay back in their offices on Friday, as they scrambled for dollars and tried to sort out their positions, while in Mumbai, the Euro zone mess scotched all hopes of banks, which till mid-last week were certain they would make a killing in the currency market.
Most foreign banks in India had built large short positions on the dollar, as they counted on the rupee to rise amid foreign inflows and good growth numbers. But their bets backfired, almost overnight, as the US currency surged.
“Strange that few saw it coming. The first shock came on Wednesday, when the rupee slipped 32 paise, and stop losses were triggered. Still, some traders felt it would bounce back. By Friday, they knew it was over. Many foreign banks have taken hits,” said the treasurer of a European bank.
Bankers and corporate treasurers are keeping a close watch on the twists and turns in the local money and currency market. Indeed, a few corporates have taken the bet that the dollar’s rise may not be sustainable. A large oil company is learnt to have entered into a derivatives deal to convert a slice of its rupee borrowing into dollar. “There is also a report that a cement firm has also done a similar deal. These players are of the belief that it will pay off in the long run,” said a trader with a large private bank.
The EU’s efforts to ring-fence Greece’s debt problems may soften the credit-default swaps and stabilise the currency market a little and dispel fears of a possible dollar shortage in international markets, but it’s unlikely to alter the course of the currency market or the views. “How markets open after Sunday’s EU meeting is important,” said a trader.
Banks in India were taking positions in the rupee-dollar market through their usual method, where they buy dollar today in the spot market and sell the dollar at value tomorrow to another bank, and the next day they repeat the transaction to roll over the short position.
“It’s nothing unusual for banks getting caught on the wrong foot. What’s important is the view they take from here,” said a banker. Banks were almost taking a structural view on the rupee to gain, something that was strengthened by a flurry of reports on China revaluing its currency. This lead to anticipation that the rupee, along with other Asian currencies, would rise, and foreign portfolio managers were banking on this to pump in more money into emerging markets with appreciating currencies.
In the local market, bond yields are down, with traders betting that interest rate may not rise as quickly as was earlier expected. Overnight swap rates, used to hedge interest rate risk, have come off, and so the Mifor swap rate that banks use to hedge cross-currency risks has fallen unusually.
The Mifor, or the Mumbai Inter-bank Forward Offer Rate, is down as much as one percentage point since April 27, and this is partly explained by the shallow market and the fall in dollar-forward premium.
A lower Mifor would mean a lower hedging cost. “Some corporates may try to borrow in dollar and hedge in rupee. But getting dollar funding may not be easy, unless things stabilise. European banks and institutions have dollar commitments and there is demand from them,” said a derivatives trader.
The currency market may stay choppy for the next two weeks. “Attempts to stabilise the market and resolve the Greece crisis could give a false relief, and a rally could later turn into broad-based selling,” said the head of forex trading at a foreign bank. What he meant was that any signs of dollar easing could be misleading and make some believe that the crisis is over.
Source :- The Economic Times

Friday, May 7, 2010

Currency carry trade could spark next global crisis: UNCTAD

GENEVA: A top UN economist warned on Thursday that so-called carry trades -- a form of speculation on the currency markets -- could sink the global economy back into crisis.
"If you asked me what is the most serious problem in the world now, I would say it's carry trade," said Heiner Flassbeck, chief economist at the UN Conference on Trade and Development.
Carry trade involves borrowing in a currency that levies low interest rates, to invest in another which yields higher interest rates. The investor makes a profit from the difference in interest rates.
With currencies across the developed world, such as the US dollar and the Japanese yen all levying low interest rates at the moment, carry traders are borrowing these currencies and investing in those of emerging economies, such as India, which is paying higher interest rates.
"This dramatically destabilises economies, because (capital) goes from low interest rate countries which are low inflation countries or deflation countries to high inflation countries and appreciates the currency higher," said Flassbeck at a press conference in Geneva.
"That is clearly a destabilising effect for global trade and has always been a danger of collapse of this trade later," he added.
"It has two big dangers -- destabilising and having the potential to bringing the world back into a financial crisis again," he warned.
The dangers of carry trade was raised by China's deputy central bank chief in January. During the World Economic Forum in Davos, Zhu Min had warned that carry trade was a "real risk this year for the economy."
Flassbeck also called on governments to take firm action to stop the markets from speculating on the euro, which is under pressure as investors bet that the currency would be weakened by the Greek crisis and other indebted eurozone states.
"I very much hope that the international community... is able to stop that speculation at a certain point of time because that would clearly contradict all the attempts to balance or to reduce the imbalances that we have in the global trading system," he said.
He pointed out that driving down the euro would also hurt economies such as the United States, which could see its strategy of raising exports thwarted if the dollar were to appreciate sharply.

Thursday, May 6, 2010

26/11 case: Ajmal Kasab sentenced to death on 5 counts

Mumbai: Pakistani gunman Ajmal Amir Kasab was today sentenced to death by a special court for the Mumbai terror attacks, three days after he was pronounced guilty of mass murder and waging war against the Indian state. The special anti-terror court of ML Tahaliyani handed down death to 22-year-old Kasab, the lone surviving 26/11 gunman, a year after the trial in the brazen attacks commenced. Kasab was given death penalty on five counts including waging war against the nation, murder, criminal conspiracy and committing terror activities.
Asserting that Kasab's role in the attacks that traumatised the nation fell under the rarest of rare category for giving death sentence, public prosecutor Ujjwal Nikam had on Tuesday branded him as "a Pakistani killing machine" and a "heartless monster" who revelled in seeing innocent people dying in pain.

Wednesday, May 5, 2010

Nifty drags below 5100

Indices extended overnight losses on Wednesday as concerns of European economic crisis hurt sentiments in global markets. All the sectoral indices, barring defensives like pharma and FMCG, were in the red. The worst hit were high-beta sectors like metals and realty space.

Tuesday, May 4, 2010

All Ulips, pension products to now come with life cover

The insurance watchdog IRDA has made it mandatory for insurance companies to provide life cover for all Unit Linked Insurance Plans (Ulips), including pension products. These companies cannot sell pension products on a unit linked platform without a life cover. The tightening of rules is seen as a fallout of the spat between the capital markets regulator Sebi and Irda over the regulation of Ulips, one of the hottest investment products in a bull run. Last month, Sebi barred 14 insurers from selling these products without its approval. The ban was, however, lifted after the government’s intervention. The turf war over the jurisdiction of Ulips will now be resolved by courts.

Monday, May 3, 2010

INCREASE IN DEARNESS ALLOWANCE FOR MAY, JUNE, JULY, 2010

The CPI announced for the months of October, November and December are as follows:-
Month CPI
Jan 2010 3926
February 2010 3880
March 3880

Thus, there will be increase of 19 slabs as per the revised pay scales and DA for the months of May, June, July, 2010 will be 39.60%. We give below the new DA effective from May, 2010 (as per revised pay scales).
DA For DA for earlier Increase in DA
May,June,July 2010 Feb,Mar,Apr, 2010
Stage Scale Basic Pay 39.60% 36.75% 2.85%
DA Amount Payable DA Amount Payable DA Amount Payable
1 I,II,III 14500 5742.00 5328.75 413.25
2 I,II,III 15100 5979.60 5549.25 430.35
3 I,II,III 15700 6217.20 5769.75 447.45
4 I,II,III 16300 6454.80 5990.25 464.55
5 I,II,III 16900 6692.40 6210.75 481.65
6 I,II,III 17500 6930.00 6431.25 498.75
7 I,II,III 18100 7167.60 6651.75 515.85
8 I,II,III 18700 7405.20 6872.25 532.95
9 I,II,III 19400 7682.40 7129.50 552.90
10 I,II,III 20100 7959.60 7386.75 572.85
11 I,II,III 20900 8276.40 7680.75 595.65
12 I,II,III 21700 8593.20 7974.75 618.45
13 I,II,III 22500 8910.00 8268.75 641.25
14 I,II,III 23300 9226.80 8562.75 664.05
15 I,II,III 24100 9543.60 8856.75 686.85
16 I,II,III 24900 9860.40 9150.75 709.65
17 I,II,III 25700 10177.20 9444.75 732.45
18 I,II,III 26500 10494.00 9738.75 755.25
19 I,II,III 27300 10810.80 10032.75 778.05
20 I,II,III 28100 11127.60 10326.75 800.85
21 I,II,III 28900 11444.40 10620.75 823.65
22 I,II,III 29700 11761.20 10914.75 846.45
23 I,II,III 30600 12117.60 11245.50 872.10
24 I,II,III 31500 12474.00 11576.25 897.75
25 I,II,III 32400 12830.40 11907.00 923.40
26 I,II,III 33300 13186.80 12237.75 949.05
27 I,II,III 34200 13543.20 12568.50 974.70
28 I,II,III 35100 13899.60 12899.25 1000.35
1 IV 30600 12117.60 11245.50 872.10
2 IV 31500 12474.00 11576.25 897.75
3 IV 32400 12830.40 11907.00 923.40
4 IV 33300 13186.80 12237.75 949.05
5 IV 34200 13543.20 12568.50 974.70
6 IV 35200 13939.20 12936.00 1003.20
7 IV 36200 14335.20 13303.50 1031.70
1 V 36200 14335.20 13303.50 1031.70
2 V 37200 14731.20 13671.00 1060.20
3 V 38200 15127.20 14038.50 1088.70
4 V 39300 15562.80 14442.75 1120.05
5 V 40400 15998.40 14847.00 1151.40
1 VI 42000 16632.00 15435.00 1197.00
2 VI 43200 17107.20 15876.00 1231.20
3 VI 44400 17582.40 16317.00 1265.40
4 VI 45600 18057.60 16758.00 1299.60
5 VI 46800 18532.80 17199.00 1333.80
1 VII 46800 18532.80 17199.00 1333.80
2 VII 48100 19047.60 17676.75 1370.85
3 VII 49400 19562.40 18154.50 1407.90
4 VII 50700 20077.20 18632.25 1444.95
5 VII 52000 20592.00 19110.00 1482.00