Friday, August 28, 2009

ICICI Bank has lost its mandate

ICICI Bank Q1 net up 21 pct | Financial Services, Reuters

India’s No.2 lender, on Saturday beat forecast with a 20.6 percent rise in net profit helped by higher trading income.

zyakaira notes: Axis Bank and SBI results were superlative in comparison, even Kotak did a nice job. Despite assurances, Chanda Kochchar’s stamp of return to old ways of significant bank intervention in all subsidoary businesses like investment banking and private equity and conservative underwriting practices along with slow moves in rural infrastructure and micro credit would mean a very slow H2 2009 and H1 2010. The current freeze in personal lines will continue to impact spread as well.

Net Interest Income is Down, and the bank is artificially holding Interest rates at ransom? Provisions are up almost 33% and NPAs are up to 2.33% from 1.81% – a result of malpractices across operations, cabalization and induction of criminals in its personal lines. I would like to think I’m being logical and not just posting a rant. Also, ICICI Bank considerably weakens India’s competitive position vis-a-vis MNC players and even the bellwether stock HDFC Bank which is otherwise only serving the small shopkeeper community instead of planning any rural distribution.

HDFC Bank results this week have been spectacular with a Net Profit growth of 30% compared to a meagre 21% for ICICI Bank. As insiders would say, ICICI Bank has lost itself in the melee they called growth but as markets would make obvious, ICICI Bank misused its mandate and has shown the potential to ignore any sensible advice from any quarter and proceed much like a drunk junk trawler on the high seas than like a responsible corporate leader.

HDFC Bank NIM is 4.1% compared to just 2% for ICICI Bank, even though they are not aggressively courting suspect business anymore. Deepak Parekh is retiring and Aditya Puri has spent 15 odd years at the helm of the bank but HDFC Bank has stayed with SME business and not ever been in the same league as ICICI after it outgrew its initial discipline and rigor in the mid 90s. ICICI’s CASA at 30.9% is a cause of concern for the bank agast 45% for HDFC Bank the only worthy direct competitor. But now, ICICI Bank is likely to lose the ball to PSBs like SBI after their consolidation exercise and even Axis Bank. HDFC Bank Net Income increased 25% while fees and commission helped Non Interest Income increase by 75.9% HDFC Bank (1416 branches in 550 cities) Balance sheet has increased to INR 186115 Crs ($3.8 billion) and Retail lines are 58% of the overall advances with CAR at 15%

ICICI, which grew loans by a third in the past few years by boosting retail, personal loans and credits, has changed tack to concentrate on the safer corporate and housing loans. India bank loan growth has slid to 16 percent in June from nearly double that in the year to March 2008 as demand for credit fell in a slowing economy.

Having backed these two banks earlier in my career, it has been excruciating to watch them take the nation down in the last few years and hopefully, the PSBs and the Yes Banks would obviate the need for these megaliths much like we outgrew Indian Financial institutions in the mid 90s..

Posted via email from The investment blog on Post


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