SBT opens 11 branches on 11-11-11

Thiruvananthapuram, Nov. 14: State Bank of Travancore (SBT) launched 11 new branches in what was sought to be projected as striking a rare numerical formation read with the year, month and date (11 – 11.11.11) of the event.

An official spokesman quoted Mr P. Nanda Kumaran, Managing Director, as announcing the soft launch of the branches on Friday (November 11). Seven of the new branches are in Kerala while the rest are in Tamil Nadu.

The bank is on ‘a branch expansion spree' and would reach a target of 1,000 by March 31, 2012, the spokesman added.

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Net interest margins must be reduced: RBI

Mumbai, Nov. 14: The RBI's Trends and Progress of Banking in 2010-11 report notes that net interest margins (NIMs), a key measure of efficiency for banks, have to be reduced for more efficient financial intermediation. For this to happen, banks have to offer attractive interest rates to depositors and lower lending rates for borrowers.

NIMs are the margins enjoyed by banks for doing their business and defined as interest earnings less interest expenses as a percentage of average total assets.

NIMs for the Indian banking system have been between 2.5 per cent and 3.1 per cent. After seeing a declining trend for five years, NIMs once again moved up in 2010-11. NIMs in India are still high when compared to other emerging economies.

If NIMs are reduced, it will help raise the level of domestic savings and channel them into investment and sustain high and inclusive growth, the report said. While profitability of banks is important, efficient financial intermediation is important from the point of view of economic growth.

Increase ‘other income'

The report calls on banks to increase “other income” (this has declined over a decade when seen as a percentage of total assets) and reduce operating expenses (wages, transaction costs) to maintain profitability.

Technological advancements have already helped reduce operating expenses.

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Bajaj Finserv gets SEBI approval for mutual fund business

MUMBAI: Bajaj FinServ, the financial services arm of Bajaj Group, has received approval from the capital markets regulator Sebi for setting up mutual fund business and is likely to enter the fray by end-2012, a top official said today.

"We have received the Sebi approval and are evaluating the right business model," the company's Managing Director Sanjiv Bajaj told reporters on the sidelines of the India Economic Summit of the World Economic Forum here.

He, however, said the company's consumer lending business may be hit going forward.

"Going ahead, it(consumer lending) will slow down. Consumer lending is the last one to be affected in a high rates cycle and I see some impact on the vertical," Bajaj said.

Bajaj FinServ's business plans continue to be "steady" even as fears of a slowdown are being expressed, he said.

"The market is large enough for us to find our attractive business," he said adding that a lot remains to be done on the inflation front.

Bajaj Finserv posted a more than two times rise in its net profit at Rs 158 crore in the second quarter of current fiscal on the back of sound rise in income in its general, and life insurance business among others.

Net profit during the July-September period of the company was at Rs 69 crore.

Total income during this period rose by 52 per cent to Rs 714 crore compared to Rs 471 crore reported an year ago period.

Source: EconomicTimes

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Banks may want bigger share of bleeding airline

Mumbai: Beleaguered Kingfisher Airlines may be looking for a government lifeline but the sharp fall in its share price raises new concerns. The consortium of 13 banks, including SBI and ICICI Bank, that holds 23.37 per cent in the loss-laden company as a result of debt restructuring (part of debt converted to equity), may seek fresh collateral since the market price of the shares has gone below the price at which they were issued to the banks in lieu of the debt.

The airline, promoted by UB group chief Vijay Mallya, was burning cash at a rapid rate and posted losses of over Rs 4,700 crore in the last three years. Industry experts and the company’s auditors recently raised doubts about the existence of the airline and said its net worth has been eroded.

Veritas, a research firm, estimated that the airline has accumulated losses of approximately Rs 8,176 crore — this is expected to rise steeply when it announces its second quarter results next week.

Banks held around 5 per cent stake in Kingfisher Airlines till December 2010 but their stake now stands at 23.37 per cent as a result of the debt recast package under which the part of the Rs 7,651 crore loan by the banks was converted into equity at Rs 64.48 per share. Banks also made a mark-to-market loss of over Rs 520 crore on loan conversion earlier this year as share prices have fallen steeply since then.

Kingfisher’s share price fell by over 19 per cent today to hit its all-time low of Rs 17.55 before closing the day at Rs 19.65 — a fall of 9.5 per cent. This fall raises the risk of pooling in more collateral to banks by Kingfisher.

While bankers say they have secured themselves against listed securities of other UB Group companies, the falling share prices raises a risk of further collateral. “We have fully secured our exposure with listed securities of other UB group companies. There has been no payment default,” said an official of a bank hinting that banks are likely to safeguard their interest with further securities.

The share price of the promoter company United Breweries (Holdings) Limited fell sharply by 16.8 per cent during the day before closing the day at Rs 89.15 with a fall of 9.7 per cent. United Breweries (Holdings) holds 40.1 per cent in Kingfisher Airlines. Only a year ago on November 10, 2010, the shares of Kingfisher Airlines were trading at Rs 90 and that of UB Holdings at Rs 336.

Another flagship UB Group company saw its share prices crumbling too as the shares fell by 8.6 per cent during the day to close at Rs 835.3. The shares however fell by up to 10.3 per cent during the day. A year-ago the share of the company stood at Rs 1,470.8.

Thus the share prices of all group companies have fallen sharply over the last one year. ICICI plunged by 4.6 per cent and SBI shares fell by 3.5 per cent.

The banking consortium is now both an owner of and a creditor to the airline, thereby complicating an intractable situation further, and jeopardizing its role as the steward of shareholder and depositor capital. With the airline bleeding with huge losses, repayment of remaining Rs 6,000 crore loans is also under watch.

Source: Financial Express

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Mutual funds hike exposure to Reliance Industries; lower valuations attractive

NEW DELHI: Shares of Mukesh Ambani-led Reliance Industries may have traded weak on the bourses in the recent months, but mutual funds have enhanced their exposure to the stock, attracted by its lower valuation.

More than 200 mutual fund schemes purchased fresh RIL ( Reliance Industries Ltd) shares, worth an estimated Rs 1,500 crore at current value, during the last quarter.

In contrast, about 100 schemes sold RIL shares from their portfolio during the quarter ended September 30. These shares are worth about Rs 350 crore at the current market price.

The MF schemes having purchased fresh RIL shares during the quarter also included those from Anil Ambani-led group's Reliance MF, the country's biggest fund house.

Interestingly, the RIL stock fell sharply by about 11 per cent during the July-September 2011 quarter.

In the past one year, RIL stock has dipped by over 20 per cent and hit a 52-week low of Rs 713.55 on August 26, 2011 and is currently trading near Rs 884 level.

But, RIL figures prominently on the portfolios of various MF schemes, by virtue of being the country's most valued firm and its high weightage on key market indices including Sensex.

MFs collect money from various investors, including the retail participants, for their different schemes and then invests the same in stocks, bonds and other securities.

One fund house generally runs a number of schemes for different market segments.

RIL is the second most-held stock after ICICI Bank by all the fund houses together. It figures on the portfolios of more than 300 MF schemes and all the funds together held RIL shares worth about Rs 6,800 crore at the end of September.

An analysis of quarterly portfolio disclosures of various funds shows that as many as 210 schemes together bought more than 1.7 crore fresh shares of RIL during the last quarter.

On the other hand, about 41 lakh RIL shares were sold by a total of 97 MF schemes during the quarter.

Only two schemes, belonging to Franklin Templton MF, had no change in their RIL holding during the quarter.

Those having sold RIL shares included only one Reliance MF scheme, while about a dozen schemes of the fund house purchased fresh RIL shares during the quarter.

Besides, the shares were also bought by various schemes of ICICI Pru, UTI, HDFC, Birla Sunlife and Franklin Templeton.

Interestingly, Reliance MF had lowered its exposure to RIL in the last fiscal.

On its part, RIL continued to avoid Reliance MF for its investment needs during the fiscal ended March 31, 2011, even as it parked money in a host of schemes from other funds.

A host of other funds had cut their RIL exposure during the last fiscal and the stock lost its position as the top- held stock for overall mutual fund space to ICICI Bank.

Source: EconomicTimes

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