ICICI Bank, India’s second-largest lender two years ago had stopped giving auto loans due to rise in defaults but now it is planning to do aggressive lending in the car and truck loans segment. This time bank will not give loans through sales agent in favor of auto dealers. Bank is targeting car and truck dealers with an aim to revive auto loans, although it is going cautioned on financing two-wheelers. Recently a pan-India meet of over 180 car dealers was organized by the bank to discuss this issue.
A senior auto industry executive of ICICI bank said, “ICICI Bank will lend much more now that will bring incremental growth to the passenger-car industry.” Previously, three years ago ICICI Bank used to be the biggest lender of auto loans. But increase in the defaults from borrowers and liquidity crisis in the economy compelled the bank to stop the auto loan. Thus in late 2007 and early 2008 car sales dropped significantly as the private banks scaled down their auto finance segments and also the rate of interest was very high on these loans.
But from past few months ICICI Bank has started showing interest in auto loans segment. The change in bank standpoint has come after the increase in the demand in the car market, in the past one year the passenger car sales has grown at 16.2% to 10.52 lakh units between April and October, 2009 over the year-ago period. ICICI Bank spokesperson refused to share any information on the new strategy or reveal any details of loans dispersal when ET reported contacted. An executive related to auto finance industry told in the current fiscal, ICICI Bank has doubled the amount allotted for the auto loan disbursement; it has been increased over Rs 1,500 crore, as against the year ended March 2009.
The auto finance market anticipated to be Rs 40,000 crore a year, in the past few months has gone through major changes. The main reason for decline in market share of private banks is the virtual exit of ICICI Bank from key market and on the other hand government-owned banks adopted aggressive lending strategy, they offered cheaper loans at interest rates less than 10%. According to sources in the banking industry ICICI Bank will remain the largest player in auto finance because of its huge disbursements in the past even though other banks such as SBI, PNB, Canara Bank and Bank of Baroda, in the recent years have overtaken it in terms of new auto loans.
Monday, November 23, 2009
Tuesday, November 3, 2009
Banks September quarter net profits stand up to 20.2%, look for more margins
In the September quarter most of the banks did not have any substantial gain from core business but have made good amount of treasury and other income.
According to September quarter results declared by 37 banks – in line with analyst guess, the aggregate net profit stood up to 20.2%.
The net profit grew mainly because of other income plunged 44% year on year, with government bonds prices moving up.
While calculating the net profit banks are allowed to include notional gains on investments such as income earned on bonds to 'other income', this process is known as marking to market. The line is reversed when bonds prices fall.
On the other hand the net interest income (NII), or the difference between interest earned and interest paid, the core business income for banks increased to 7.9% year on year basis in comparison to last year 38% jump during the same period.
However that is over the June quarter, NII rose to 8.4%, mainly because of improvement in loan disbursements.
Amongst the banks the State Bank of India, India's largest by market capitalization, has reported a 10.2% jump in net profit, while its NII grew by just 2.81% on year-on-year basis.
ICICI Bank, the second largest bank net profit was insignificant up to 2.56% due to lower non-interest income. While its NII declined by 5.2%, as bank disbursed 14% less loans in the quarter.
Fewer loans were disbursed as ICICI had adopted the strategy to reduce exposure to the so-called "unsecured" retail loans and instead focused on corporate lending.
"Bank earnings have been a mixed bag. Several banks have shown an increase in treasury profits leading to improved bottom lines," said Vaibhav Agrawal, senior analyst-banking at Angel Broking.
Banks which benefited the most from a rise in other income include Central Bank of India (other income up 332.4%), Allahabad Bank (208.5%) and Canara Bank (163.6%).
Suresh Ganapathy, analyst with Deutsche Bank said the net profit results of some public sector banks haven't been up to mark.
"Higher treasury profits and lower provisioning has helped them to achieve higher net profit," he said.
Few of the banks which made profit as their core business did well include IDBI Bank (core income up 106.2%), IndusInd Bank (98.2%), Vijaya Bank (35.53%), South Indian Bank (31.27%) and Axis Bank (25.86%).
But one area which remains of concern is asset quality.
"A lot of the loan growth can be attributed to liquidity, which is not a healthy trend," according to an analyst with the domestic brokerage, not wishing to be named.
Thus net non-performing assets or bad loans of 37 banks are up by 25% on a year on year basis.
On a chronological basis, or over the June quarter, bad loans have increased by 1.12%.
"Asset quality declined at some public sector entities such as Bank of India," said Aggrawal.
The banks faced loss due to default in repayments on some retail loans and on loans to real estate and export-oriented sectors.
But the companies were able to moderate the debt burden through equity-based fund-raised by corporates in the quarter.
Praveen Sood, CFO of Hindustan Construction Company stated many realtors paid their debts through QIP proceeds. "A lot of liquidity was also made available through various other measures so that also helped," Sood said. HCC's current debt estimates to Rs 2,200 crore. Furthermore, analysts are expecting improvement in interest income and margins if credit offtake picks up. But it will all depend on the Reserve Bank of India's (RBI) new directive, which can impact profitability.
The central bank told banks must achieve at least 70% provision coverage by September next year for their bad loans.
According to analysts this will strike net profit by 3% to 4% on a back-of-the-envelope basis as all banks combined will have to provide for around of Rs 1,2000 crore to meet coverage ratio.
The central bank will be issuing more detailed guidelines on this. "It would be premature to take this into consideration right now, therefore," said Ganapathy.
According to Aggarwal the earnings growth in the third quarter, is not going to be much strong.
He observes credit growth in the 15-17% range. Ganapathy concurs. "Margins will improve going forward on account of re-pricing of bulk deposits in the coming two quarters, which will reduce cost of funds," Ganapathy said. He is expecting Bank of Baroda, PNB and HDFC to perform much better over the next one year.
According to September quarter results declared by 37 banks – in line with analyst guess, the aggregate net profit stood up to 20.2%.
The net profit grew mainly because of other income plunged 44% year on year, with government bonds prices moving up.
While calculating the net profit banks are allowed to include notional gains on investments such as income earned on bonds to 'other income', this process is known as marking to market. The line is reversed when bonds prices fall.
On the other hand the net interest income (NII), or the difference between interest earned and interest paid, the core business income for banks increased to 7.9% year on year basis in comparison to last year 38% jump during the same period.
However that is over the June quarter, NII rose to 8.4%, mainly because of improvement in loan disbursements.
Amongst the banks the State Bank of India, India's largest by market capitalization, has reported a 10.2% jump in net profit, while its NII grew by just 2.81% on year-on-year basis.
ICICI Bank, the second largest bank net profit was insignificant up to 2.56% due to lower non-interest income. While its NII declined by 5.2%, as bank disbursed 14% less loans in the quarter.
Fewer loans were disbursed as ICICI had adopted the strategy to reduce exposure to the so-called "unsecured" retail loans and instead focused on corporate lending.
"Bank earnings have been a mixed bag. Several banks have shown an increase in treasury profits leading to improved bottom lines," said Vaibhav Agrawal, senior analyst-banking at Angel Broking.
Banks which benefited the most from a rise in other income include Central Bank of India (other income up 332.4%), Allahabad Bank (208.5%) and Canara Bank (163.6%).
Suresh Ganapathy, analyst with Deutsche Bank said the net profit results of some public sector banks haven't been up to mark.
"Higher treasury profits and lower provisioning has helped them to achieve higher net profit," he said.
Few of the banks which made profit as their core business did well include IDBI Bank (core income up 106.2%), IndusInd Bank (98.2%), Vijaya Bank (35.53%), South Indian Bank (31.27%) and Axis Bank (25.86%).
But one area which remains of concern is asset quality.
"A lot of the loan growth can be attributed to liquidity, which is not a healthy trend," according to an analyst with the domestic brokerage, not wishing to be named.
Thus net non-performing assets or bad loans of 37 banks are up by 25% on a year on year basis.
On a chronological basis, or over the June quarter, bad loans have increased by 1.12%.
"Asset quality declined at some public sector entities such as Bank of India," said Aggrawal.
The banks faced loss due to default in repayments on some retail loans and on loans to real estate and export-oriented sectors.
But the companies were able to moderate the debt burden through equity-based fund-raised by corporates in the quarter.
Praveen Sood, CFO of Hindustan Construction Company stated many realtors paid their debts through QIP proceeds. "A lot of liquidity was also made available through various other measures so that also helped," Sood said. HCC's current debt estimates to Rs 2,200 crore. Furthermore, analysts are expecting improvement in interest income and margins if credit offtake picks up. But it will all depend on the Reserve Bank of India's (RBI) new directive, which can impact profitability.
The central bank told banks must achieve at least 70% provision coverage by September next year for their bad loans.
According to analysts this will strike net profit by 3% to 4% on a back-of-the-envelope basis as all banks combined will have to provide for around of Rs 1,2000 crore to meet coverage ratio.
The central bank will be issuing more detailed guidelines on this. "It would be premature to take this into consideration right now, therefore," said Ganapathy.
According to Aggarwal the earnings growth in the third quarter, is not going to be much strong.
He observes credit growth in the 15-17% range. Ganapathy concurs. "Margins will improve going forward on account of re-pricing of bulk deposits in the coming two quarters, which will reduce cost of funds," Ganapathy said. He is expecting Bank of Baroda, PNB and HDFC to perform much better over the next one year.
Wednesday, October 21, 2009
ICICI Bank decides to slash auto loans by 50 basis points ahead the festival season
ICICI Bank the largest private sector bank has decided to slash its auto loan rates by 50 basis points to 10.5-11 per cent, before the festival season. The bank is taking this measure in line with its target of growing its retail book.
A senior ICICI Bank official pointed out, “The reduction in rate would be announced in a day or two; the team is still working out the finer details”.
Currently the bank has set auto loans at 11-11.5 per cent. Previously at its peak, the auto loans were available at 12-13 per cent.
In June bank’s total auto loan portfolio accounted to Rs 25,920 crore, out of which Rs 10,000 crore is retail auto loan.
The bank has decided to focus on four-wheeler loans which will be disbursed by its branches. It will not be selling through the direct selling agent.
Over the past two years bank completely stopped giving two-wheeler loans and on four-wheeler loans it has been going slow.
Chanda Kochhar, managing director and CEO of ICICI Bank, has been claiming that now it is the right time that the bank can revert its well rounded growth in portfolios as there has been increase in the domestic demand and retail customers have also started spending.
In her speech at the MSME (micro and small and medium enterprises) conclave, Kochhar said until January the demand for retail products had dropped especially home loans, the decline was of 50 per cent. She added, “But from January, I clearly see a 50 per cent rise in demand. So we are focusing on all segments in line with the revival in demand. MSME will continue to be a focus area for the bank as the segment contributes 40 per cent of the country’s industrial production and forms 35 per cent of the total exports”.
A senior ICICI Bank official pointed out, “The reduction in rate would be announced in a day or two; the team is still working out the finer details”.
Currently the bank has set auto loans at 11-11.5 per cent. Previously at its peak, the auto loans were available at 12-13 per cent.
In June bank’s total auto loan portfolio accounted to Rs 25,920 crore, out of which Rs 10,000 crore is retail auto loan.
The bank has decided to focus on four-wheeler loans which will be disbursed by its branches. It will not be selling through the direct selling agent.
Over the past two years bank completely stopped giving two-wheeler loans and on four-wheeler loans it has been going slow.
Chanda Kochhar, managing director and CEO of ICICI Bank, has been claiming that now it is the right time that the bank can revert its well rounded growth in portfolios as there has been increase in the domestic demand and retail customers have also started spending.
In her speech at the MSME (micro and small and medium enterprises) conclave, Kochhar said until January the demand for retail products had dropped especially home loans, the decline was of 50 per cent. She added, “But from January, I clearly see a 50 per cent rise in demand. So we are focusing on all segments in line with the revival in demand. MSME will continue to be a focus area for the bank as the segment contributes 40 per cent of the country’s industrial production and forms 35 per cent of the total exports”.
Wednesday, September 2, 2009
ICICI is open for domestic takeover than going for overseas buy: Kochhar
After missing a chance of global acquisition in 2008, on Sunday ICICI Bank said it is ready for domestic takeover as it is better to go for takeover in India in the current environment rather than going for overseas buy.
ICICI Bank CEO and managing director Chanda Kochhar speaking about acquisition prospects this year and the elusive search for a property last year said, “I am always open... but the question will always be in terms of what is available and at what value, and then you weigh the option”.
Emphasizing that the bank with over 17 per cent capital adequacy ratio is the best capitalized unit in the world, thus she said, “So, clearly, what I would say, we are definitely growing in India, when one talks of aggression. Again, in a way to put that in context, we are definitely a growth organization and the growth DNA continues.”
Urging further on the bank’s willingness for acquisition at the right value offer, she clarified, “But that doesn’t mean that anything is on the cards. If you write it that way, investors will think I am acquiring something. I am always open.”
She gave a positive reply to a question whether acquisition within India made more sense than one overseas.
Ms Kochhar informed in March bank had formed a “strategic committee” in March 2008 for exploring an acquisition. “When the committee was formed, what we were planning frankly at that time (was) on the international side.” In response to whether bank is still opened to acquire global property, Ms Kochhar said, “(We are) clearly not looking for any international acquisition because in the current scenario the risk on the international portfolio are still unknown.”
She informed, “As of now, we are neither growing out presence in the international market from where we are because we are already present in 18 countries. We have substantial number of branches so we don’t see requirement to grow (in overseas markets)”.
Earlier the strategy committee which was formed for acquisitions last year was dispersed, as the planned purchase did not took place. Moreover, Ms Kochhar said, “Our focus is to grow as the Indian corporate grows here, and even international focus was always to grow with international requirements of the Indian corporate.”
Now the concern is, she said, “Is whether you grow organically or inorganically. Well, we have capacity to set up 580 branches in one year. So, obviously one then weighs what is the cost of acquiring a bank of similar size or is it more economical to do it internally.”
ICICI Bank CEO and managing director Chanda Kochhar speaking about acquisition prospects this year and the elusive search for a property last year said, “I am always open... but the question will always be in terms of what is available and at what value, and then you weigh the option”.
Emphasizing that the bank with over 17 per cent capital adequacy ratio is the best capitalized unit in the world, thus she said, “So, clearly, what I would say, we are definitely growing in India, when one talks of aggression. Again, in a way to put that in context, we are definitely a growth organization and the growth DNA continues.”
Urging further on the bank’s willingness for acquisition at the right value offer, she clarified, “But that doesn’t mean that anything is on the cards. If you write it that way, investors will think I am acquiring something. I am always open.”
She gave a positive reply to a question whether acquisition within India made more sense than one overseas.
Ms Kochhar informed in March bank had formed a “strategic committee” in March 2008 for exploring an acquisition. “When the committee was formed, what we were planning frankly at that time (was) on the international side.” In response to whether bank is still opened to acquire global property, Ms Kochhar said, “(We are) clearly not looking for any international acquisition because in the current scenario the risk on the international portfolio are still unknown.”
She informed, “As of now, we are neither growing out presence in the international market from where we are because we are already present in 18 countries. We have substantial number of branches so we don’t see requirement to grow (in overseas markets)”.
Earlier the strategy committee which was formed for acquisitions last year was dispersed, as the planned purchase did not took place. Moreover, Ms Kochhar said, “Our focus is to grow as the Indian corporate grows here, and even international focus was always to grow with international requirements of the Indian corporate.”
Now the concern is, she said, “Is whether you grow organically or inorganically. Well, we have capacity to set up 580 branches in one year. So, obviously one then weighs what is the cost of acquiring a bank of similar size or is it more economical to do it internally.”
Thursday, August 6, 2009
Small banks witness increase in transactions after open ATM rule
Since the launch of free cash withdrawal facility from automated teller machines (ATMs) the small banks are getting large number of customers of larger banks. Previously the banks were charging customers for cash withdrawals and balance enquiry at third-party ATM but from April 1 as per RBI norms the charges cannot be passed on to the customers.
Now the customers are using small banks ATM located near to their place due to which the big banks such as ICICI bank and SBI paying more interchange fee to other banks for using their ATMs.
Therefore big banks such as ICICI Bank country’s largest private sector player is paying a monthly outgo of Rs 4-5 crore as the payment of interchange fee to other banks. Even the State Bank of India (SBI) country’s largest public sector bank is getting equal number of other banks’ customers using its ATMs as the number of its customers using other banks’ machines. R P Sinha the deputy managing director for information technology said, “The total number of transactions at our ATMs have gone up by more than 100 per cent since April 1. However, our customers are also using other ATMs, depending on convenience”.
The banks have to pay interchange fee of Rs 18-20 per transaction when a banks’ customer uses the ATM of another bank.
On the other hand the number of customers has increased in case of smaller players. Dhanalakshmi Bank sources have informed there has been increase in transactions by 50%, is largely of the customers from other banks.
According to bank’s Managing Director and CEO Amitabh Chaturvedi, “Often, ATMs of large banks have long queues outside them and if our ATM is just next door, there is a spillover into our ATMs”.
YES Bank a new generation bank is having 216 ATMs, has not witnessed much increase but its country-head for cash management and direct banking pointed out there has been a major increase in the number of transactions and positive inflows from interchange fees. T S Jagadeesan, General Manager, Planning informed, “We had apprehensions about the (free ATM use) rule, since we have a significant number of no-frills account-holders, who have no minimum balance requirement. However, so far we have seen positive interchange flows”.
While the big banks having large networks of ATM such as Axis Bank are getting positive cash flow from the ATM. Aspy Engineer, Senior Vice-President of Alternate Channels pointed out, “Since April, both the number of interchange transactions we have acquired and cases where our customers have gone to other ATMs have gone up by 100 per cent. However, we were a net acquirer even before the rule came into force and so are interchange revenue flows are positive”.
Now the customers are using small banks ATM located near to their place due to which the big banks such as ICICI bank and SBI paying more interchange fee to other banks for using their ATMs.
Therefore big banks such as ICICI Bank country’s largest private sector player is paying a monthly outgo of Rs 4-5 crore as the payment of interchange fee to other banks. Even the State Bank of India (SBI) country’s largest public sector bank is getting equal number of other banks’ customers using its ATMs as the number of its customers using other banks’ machines. R P Sinha the deputy managing director for information technology said, “The total number of transactions at our ATMs have gone up by more than 100 per cent since April 1. However, our customers are also using other ATMs, depending on convenience”.
The banks have to pay interchange fee of Rs 18-20 per transaction when a banks’ customer uses the ATM of another bank.
On the other hand the number of customers has increased in case of smaller players. Dhanalakshmi Bank sources have informed there has been increase in transactions by 50%, is largely of the customers from other banks.
According to bank’s Managing Director and CEO Amitabh Chaturvedi, “Often, ATMs of large banks have long queues outside them and if our ATM is just next door, there is a spillover into our ATMs”.
YES Bank a new generation bank is having 216 ATMs, has not witnessed much increase but its country-head for cash management and direct banking pointed out there has been a major increase in the number of transactions and positive inflows from interchange fees. T S Jagadeesan, General Manager, Planning informed, “We had apprehensions about the (free ATM use) rule, since we have a significant number of no-frills account-holders, who have no minimum balance requirement. However, so far we have seen positive interchange flows”.
While the big banks having large networks of ATM such as Axis Bank are getting positive cash flow from the ATM. Aspy Engineer, Senior Vice-President of Alternate Channels pointed out, “Since April, both the number of interchange transactions we have acquired and cases where our customers have gone to other ATMs have gone up by 100 per cent. However, we were a net acquirer even before the rule came into force and so are interchange revenue flows are positive”.
Monday, June 22, 2009
Big companies try to revive zero interest consumer loan market
The big banks like CitiFinancial, ICICI Bank and GE Money have complete stopped giving loans for consumer goods since then zero interest loans have become a thing of the past. But now the major consumer durable companies are trying to revive back the concept of zero interest consumer loans in order to attract more customers. According to the report printed in Financial Chronicle companies like Samsung, Videocon and LG on their own trying to bring it back. For this these companies have signed agreements with non-banking finance companies to offer easy loans to consumers.
Amit Gupta Vice President-Sales, Videocon, said, "About 10 percent of the company's sales depended on easy consumer loans with tenures ranging from 11-18 months." By and large, the companies will bear the interest amount, which will pay the financiers at a rate of nearly five percent.
The industry sources say, Bajaj Finance and Shriram Finance have just now entered the easy loans market and trying to take hold of the opportunity. Previously the major financial institutions have suffered losses therefore decided to focus less on the segment of consumer loans.
Amit Gupta Vice President-Sales, Videocon, said, "About 10 percent of the company's sales depended on easy consumer loans with tenures ranging from 11-18 months." By and large, the companies will bear the interest amount, which will pay the financiers at a rate of nearly five percent.
The industry sources say, Bajaj Finance and Shriram Finance have just now entered the easy loans market and trying to take hold of the opportunity. Previously the major financial institutions have suffered losses therefore decided to focus less on the segment of consumer loans.
Wednesday, May 13, 2009
Private bank might not be included in purview of the new FDI guidelines
Government directing towards RBI’s concern on the change of their status from 'resident' to 'foreign' if the norms are implemented there is possibility that private sector banks like ICICI bank, HDFC bank and Vysya Bank might not be included in the purview of the new FDI guidelines.
An official stated "There is a probability that we will exempt these banks from the guidelines on the lines of the exemptions in the insurance sector".
In February the of Industrial Policy and Promotion, through a string of 'Press notes' made changes in the FDI guidelines after which many private sector banks found that their status will get changed from ‘resident’ to ‘non-resident’.
There will be change in status because the total FDI will take into consideration the stakes held by Non-Resident Indians, American and global depository receipts, foreign currency convertible bonds and convertible preference shares.
Thus RBI raised the issue with the Finance Ministry and DIPP, in which it pointed out that as per the revised policy, foreign investment in all these banks will go beyond 50% in the new policy regime therefore they will be treated as non-resident entities.
An official stated "There is a probability that we will exempt these banks from the guidelines on the lines of the exemptions in the insurance sector".
In February the of Industrial Policy and Promotion, through a string of 'Press notes' made changes in the FDI guidelines after which many private sector banks found that their status will get changed from ‘resident’ to ‘non-resident’.
There will be change in status because the total FDI will take into consideration the stakes held by Non-Resident Indians, American and global depository receipts, foreign currency convertible bonds and convertible preference shares.
Thus RBI raised the issue with the Finance Ministry and DIPP, in which it pointed out that as per the revised policy, foreign investment in all these banks will go beyond 50% in the new policy regime therefore they will be treated as non-resident entities.
Tuesday, May 5, 2009
ICICI bank plans to open 580 new branches to increase deposits
Chanda Kochhar, the new chief executive officer and managing director of ICICI Bank. Kochhar took over from KV Kamath on May 1 told the bank is planning an aggressive increase of current account and saving account (CASA) to 33 per cent from the present level of 28 per cent by next year. Thus in view of this bank is planning to increase the growth once the deposit base mix gets aligned to a higher percentage of low-cost deposits.
As on March 31, 2009 the total deposits of the bank stood at Rs 218,348 crore compared to Rs 244,431 crore on March 31, 2008. Even the CASA ratio also showed improvement of 28.7 per cent of total deposits on March 31, 2009 from 26.1 per cent on March 31, 2008.
In an exclusive interview with Financial Chronicle, Kochhar told the bank will be rolling out to 580 new branches to build up the CASA deposits. Kochhar added, “The next phase of growth will come after we rebalance our deposit structure. By next year, we will be able to grow on a much more balanced balance sheet. We have sufficient branch licenses. We will reduce our dependence on bulk deposit because interest rates on these deposits are more volatile. Through CASA we will have a more stable interest rate”.
Kochhar added the bank will also review its shareholding in life insurance companies and the asset management company, but that the process will be slow.
She explained, “We will wait for the right time and right value and do it over a period of time. The IPO (initial public offering) of ICICI Prudential will also happen, but we have fixed no specific time frame now. We will definitely look at monetizing investments. We are in no desperate need to raise capital”.
Chanda, 48-year old, has been ranked 28th in the Fortune list of most powerful women in business, said she can already see recovery indications in the economy.
She pointed out, “Maybe in the next one year, we would get back to the next phase of growth. But it is too early to say which segments we will focus. It would depend on demands of the environment at that time”.
During the financial year 2008-09 the banking system observed a credit growth of 17 per cent while the ICICI Bank’s loan book slide down by 3.2 per cent.
Kochhar, while intricate on the present strategy of the bank that will propel it to the next round of growth explained, “We have controlled a lot of our credit losses and credit quality by tightening our credit parameters. We have cut back on products that used to contribute to our losses because we have realized that risks on these products have increased substantially. Losses are more or less controlled. We have stopped small-ticket personal loans, where the average size is about Rs 30,000 and less and some other unsecured loans”.
The bank has been able to build up gross non-performing assets (NPAs) of Rs 9,929 crore, of which 70 per cent has come from retail advances. However, Kochhar stated she is not more worried on the NPA levels.
She added, “I am not worried about the NPAs because it will peak out in a few quarters. But on the corporate side, there will be some restructuring required, but again no NPA surprises here”.
In bank books the total restructured assets include Rs 6,100 crore of debt out of which the major portion is of corporate debt.
In the fourth quarter bank restructured around Rs 1,100 crore of assets while about Rs 2,000 crore worth of assets are lined up to be restructured.
Kochhar told, “Most of the restructured assets are from the corporate side. Going forward, we expect more restructuring from wholesale lending but expect no NPAs".
Meanwhile the bank is not having any capital raising programs because refinancing requirement will be funded through the deposit base.
Speaking about the international front, Kochhar said the bank is having a repayment liability of $1 billion, due for repayment this year. Majority of the refinancing dues will be funded by the deposits.
As on March 31, 2009 the total deposits of the bank stood at Rs 218,348 crore compared to Rs 244,431 crore on March 31, 2008. Even the CASA ratio also showed improvement of 28.7 per cent of total deposits on March 31, 2009 from 26.1 per cent on March 31, 2008.
In an exclusive interview with Financial Chronicle, Kochhar told the bank will be rolling out to 580 new branches to build up the CASA deposits. Kochhar added, “The next phase of growth will come after we rebalance our deposit structure. By next year, we will be able to grow on a much more balanced balance sheet. We have sufficient branch licenses. We will reduce our dependence on bulk deposit because interest rates on these deposits are more volatile. Through CASA we will have a more stable interest rate”.
Kochhar added the bank will also review its shareholding in life insurance companies and the asset management company, but that the process will be slow.
She explained, “We will wait for the right time and right value and do it over a period of time. The IPO (initial public offering) of ICICI Prudential will also happen, but we have fixed no specific time frame now. We will definitely look at monetizing investments. We are in no desperate need to raise capital”.
Chanda, 48-year old, has been ranked 28th in the Fortune list of most powerful women in business, said she can already see recovery indications in the economy.
She pointed out, “Maybe in the next one year, we would get back to the next phase of growth. But it is too early to say which segments we will focus. It would depend on demands of the environment at that time”.
During the financial year 2008-09 the banking system observed a credit growth of 17 per cent while the ICICI Bank’s loan book slide down by 3.2 per cent.
Kochhar, while intricate on the present strategy of the bank that will propel it to the next round of growth explained, “We have controlled a lot of our credit losses and credit quality by tightening our credit parameters. We have cut back on products that used to contribute to our losses because we have realized that risks on these products have increased substantially. Losses are more or less controlled. We have stopped small-ticket personal loans, where the average size is about Rs 30,000 and less and some other unsecured loans”.
The bank has been able to build up gross non-performing assets (NPAs) of Rs 9,929 crore, of which 70 per cent has come from retail advances. However, Kochhar stated she is not more worried on the NPA levels.
She added, “I am not worried about the NPAs because it will peak out in a few quarters. But on the corporate side, there will be some restructuring required, but again no NPA surprises here”.
In bank books the total restructured assets include Rs 6,100 crore of debt out of which the major portion is of corporate debt.
In the fourth quarter bank restructured around Rs 1,100 crore of assets while about Rs 2,000 crore worth of assets are lined up to be restructured.
Kochhar told, “Most of the restructured assets are from the corporate side. Going forward, we expect more restructuring from wholesale lending but expect no NPAs".
Meanwhile the bank is not having any capital raising programs because refinancing requirement will be funded through the deposit base.
Speaking about the international front, Kochhar said the bank is having a repayment liability of $1 billion, due for repayment this year. Majority of the refinancing dues will be funded by the deposits.
Wednesday, March 25, 2009
Credit Score and Insurance: How Are They Related?
Credit score and insurance are very much related. Insurance providers may utilize your credit history while you are going for new home or automobile insurance. This article would give you some useful details that would help you know in what manner your credit score is utilized by the insurance companies.
What Is the Credit Score that Insurance Providers Prefer?
A credit score is basically a picture of your credit at a particular moment. The details of your credit history and your application for insurance are taken into account by the insurance providers for determining a particular credit score. This is known as insurance credit score and it ranges from 0-999. A higher insurance credit score suggests a better score.
How Your Credit Score is Utilized by the Insurance Providers
If an insurance company is dependent on credit score, it can utilize your credit score for the purpose of underwriting and ascertaining the amount of premium payable by you.
Underwriting is the procedure of determining whether a new policy can be issued to you or a current policy has to be renewed.
Rating is the procedure that decides the amount of premium that you need to pay for insurance. Besides the usage of credit details, insurance providers would utilize other conventional rating elements to figure out the premium that is payable for your home or automobile insurance policy. A few of these conventional rating elements include the following:
Homeowners insurance - your claim history, your residential address and the replacement cost of your home.
Automobile insurance - your residential address, type of car that you have and your driving history.
How Would You Know Whether Your Credit History has Influenced Buying of Insurance?
FCRA (The Fair Credit Reporting Act) necessitates insurance providers to inform consumers if any unfavorable step has been taken due to their credit details. FCRA delineates unfavorable steps to include raising of premiums, refusing or terminating coverage, altering the amount of coverage or the terms and conditions in such a manner that it causes harm to the consumer. The insurance provider should also let him know the name of the countrywide credit bureau that provided the details.
Instances of an unfavorable step include the following:
What Is the Credit Score that Insurance Providers Prefer?
A credit score is basically a picture of your credit at a particular moment. The details of your credit history and your application for insurance are taken into account by the insurance providers for determining a particular credit score. This is known as insurance credit score and it ranges from 0-999. A higher insurance credit score suggests a better score.
How Your Credit Score is Utilized by the Insurance Providers
If an insurance company is dependent on credit score, it can utilize your credit score for the purpose of underwriting and ascertaining the amount of premium payable by you.
Underwriting is the procedure of determining whether a new policy can be issued to you or a current policy has to be renewed.
Rating is the procedure that decides the amount of premium that you need to pay for insurance. Besides the usage of credit details, insurance providers would utilize other conventional rating elements to figure out the premium that is payable for your home or automobile insurance policy. A few of these conventional rating elements include the following:
Homeowners insurance - your claim history, your residential address and the replacement cost of your home.
Automobile insurance - your residential address, type of car that you have and your driving history.
How Would You Know Whether Your Credit History has Influenced Buying of Insurance?
FCRA (The Fair Credit Reporting Act) necessitates insurance providers to inform consumers if any unfavorable step has been taken due to their credit details. FCRA delineates unfavorable steps to include raising of premiums, refusing or terminating coverage, altering the amount of coverage or the terms and conditions in such a manner that it causes harm to the consumer. The insurance provider should also let him know the name of the countrywide credit bureau that provided the details.
Instances of an unfavorable step include the following:
- Termination, refusal or non-renewal of coverage
- Restricting advantages like eligibility for dividends
- Not offering the consumer the cheapest rate
- Not offering the consumer the most attractive discount
- Providing the consumer an incomplete type of coverage
- Providing coverage for something else that was not asked for
- Addition of a premium surcharge
Tuesday, March 17, 2009
ICICI Bank awarded ‘best bank’ for NRI Services
ICICI bank the largest private sector bank and the second largest bank in India, NRI services has won the World Finance (London) award for the best bank for offering NRI Services Worldwide, 2008. The bank has also been judged best for its remittance business segment for the second year in a row by the Asian Banker Magazine.
According to Girish Nayak, head of ICICI Bank NRI Services bank’s main international strategy has been the NRI footprint.
Nayak explained, "ICICI Bank helps NRIs maintain the all-important link with their home country by offering a complete product suite that is available at the click of a mouse or a simple phone call away. The Bank is always innovating new products to stay a step ahead of the NRI needs and maintain its leadership position as the NRI Banker of choice”.
In 2001 ICICI Bank launched its NRI Services as a one-stop shop to address the home-linked financial needs of NRIs. The product suite offered include a variety of savings and deposit products, structured investment options, online remittances, mortgages, insurance and equity-linked products addressing the entire gamut of financial needs of this overseas community.
ICICI Bank is having a global presence and a rich customer base spread across 18 other countries, through its combination of subsidiaries, branches and representative offices. The bank is having has a presence in the UK, Canada and Russia through wholly owned subsidiaries.
Product distinction includes a premium product called – NRI Edge targeted at affluent NRIs looking for priority services and exclusive privileges. Other specialized products being offered include a card-based remittance account for with drawing down money transfers at the India ATMs and the Easy Receive a beneficiary-focused account customized for NRIs' family members in India with linked benefits.
ICICI Bank first started a foreign exchange forwards linked product called Rupee Plus. The product is a risk free and an opportunity to earn significantly higher returns on NRI investments. 100% principal and return protection is offered by this product.
For NRIs Money Transfers is a core need therefore ICICI Bank is offering state of the art technology enabled speedy and low-cost options to NRIs. Customers from the overseas ICICI Bank offices are able to initiate instant payment to their accounts in India. Customers also get the facility to transfer funds from their ICICI Bank India accounts to any other bank account efficiently at no additional cost using the online platform.
Friday, March 6, 2009
PSBs, car companies signing agreements with a hope to push sales
From the last six to seven months automobile industry has been facing slump in demand but as the banks have started reducing interest rates on auto loans the automobile companies are trying to take full advantage of this. The auto companies are getting into tie-up with public sector banks (PSBs) to offer cheaper finance to the buyers to push their sales.
Except for State Bank of India, PSBs, which are having less than 20 per cent share in the auto finance business, are signing these alliances with a view to attain a bigger share of the pie.
SBI, and other banks such as HDFC Bank, Axis Bank, ICICI Bank and Kotak Mahindra Bank all account for 75 per cent of the market share.
Recent tie-up between banks and auto companies include Punjab National Bank (PNB) and Syndicate Bank with Hyundai Motors, Andhra Bank and Bank of Baroda with General Motors, Central Bank of India and Corporation Bank with Tata Motors, Punjab and Sind Bank and Corporation Bank with Maruti Suzuki.
Besides lower interest rates, some of the deals offer facility of lower margin money. Along the retail tie-ups, many auto dealers have also signed up with country’s largest lender SBI.
Hyundai Senior Vice-president (marketing and sales) Arvind Saxena stated, “The rates offered by public sector banks are much more attractive than the ones offered by private sector players. In addition, these banks have a wider reach across the country. The share of PSU banks in our sales has risen to 30 per cent from 18 per cent earlier”.
Auto makers also stated that now the processing time required for a vehicle loan by a public sector bank has also reduced.
General Motors India Director and V-P (corporate affairs) P Balendran informed, “Private sector banks had a market share of 70 per cent while PSU banks had a share of about 10-15 per cent and the balance was in cash. PSUs’ share has gone up to 35-40 per cent as of today. Speedier processing of loans by PSU banks has also helped them gain market share besides lower interest rates”.
In February Maruti Suzuki, a leader in the passenger car segment, had sold 70,625 vehicles, thus an increase of 19 per cent over same period last year. According to auto analyst with equity broking house maybe this is an indication of change in the business sentiment.
Public sector banks (PSB) are also seeing opportunity in signing these tie-ups as this can help in filling the gap in the financing market ever since private banks reduced their auto finance portfolio considerably. PSBs have the advantage of a huge network especially in the rural sector which has not been much impacted by slowdown.
But while sanctioning loan banks are scrutinizing a loan application very carefully.
According to credit head of small public sector bank, “Even if tie-ups are in place, it does not mean that branches would start work is gusto. They will make doubly sure that credit proposal is going to be sound to avoid for containing increase in incidence of bad loans”.
Wednesday, March 4, 2009
ICICI bank customers’ credit card disputes settled in Lok adalats
On Sunday in New Delhi in five district courts 100 Lok adalats were held. This was made possible with a unique collaboration between ICICI bank and Delhi Legal Services Authority. The purpose of these Lok adalat was to settle long pending cheque bouncing and recovery cases.
During the proceedings the defaulters gave their card numbers, therefore the details were then forwarded to the Lok adalat. The hearing of issues was heard in the presence of a magistrate and the bank officer.
A customer expressing his satisfaction said, "I like the concept because at least I was able to talk to the bank officer and they assured me that the matter will be settled. I'm relieved now”.
While another customer satisfied with the procedure said, “My cheque had bounced and my cash payment was not reflecting. Now the issue is being addressed. It’s good because I could avoid the harassment of the court.”
Thousands of ICICI bank customers across the city long pending bank disputes were settled in the day-long proceedings without getting into the legal rigmarole. But obviously, it was not a happy experience for everyone.
One of the unhappy customer complained, “I have been here since morning and they've been directing me from one room to the other. It is a useless concept.”
The bank had already computerized data relating to the 1.1 lakh cases pending in different lower courts therefore all the proceedings at the Lok adalats took place online.
After the settlement of the dispute, the orders of the Lok adalat will be dispatched to the concerned courts. Approximately 40,000 customers contacted the bank and settled their cases outside the court.
Tuesday, February 10, 2009
Bankers request RBI for relaxation in deadline for loan recast
In a meeting with the Reserve Bank of India (RBI), following the monetary policy announcement on Tuesday bank chairmen expressed their apprehension about more loans turning bad in coming quarters as the impact of global slowdown starts setting in.
But some bankers feel that the impact of slowdown on loan quality will be visible only after a few quarters. Bankers feel that despite of the fact textiles, real estate, retail, exports and auto sectors will come under increasing strain, banks will not be left with much options in a couple of quarters to prevent an asset from moving into the sub-standard category.
Therefore bankers are asking RBI to relax the deadline for reworking loan repayment schedules to avert cash-strapped corporates from being graded as defaulters. Earlier the banking regulator had permitted banks to reorganize their bad loans up to June 30, 2009, provided banks ‘initiated restructuring’ of accounts before January 31, 2009. Banks also wanted a explanation on whether instigating restructuring meant the signing of a new agreement or receiving a proposal from the borrower.
They further added, “We have sought a clarification to avoid a dispute with auditors in future. Auditors should not claim that we restructured an account, against RBI norms.”
As loan assets held by banks have started failing, with some banks reporting a rise in bad loans in December 2008. The country’s largest bank, State Bank of India (SBI), have accounted gross NPAs of Rs 13,314 crore for the quarter ended December 2008 as compared to Rs 11,182 crore in the corresponding period last year.
In the same period,
However bankers remarked, bankers are closely scrutinizing their asset portfolios and have stepped up their recovery measures in expectation of increased bad loans.
Wednesday, January 21, 2009
ICICI bank reviews its used car financing business
ICICI Bank is reviewing its used car financing business model. The bank has closed giving credit limits to its direct selling agents (DSAs), at the time when other banks have only constricted their DSA limits, after being hit by a burst in delinquencies and fraud.
ICICI Bank has also slashed dealer commissions which in turn have resulted in a reduction in the shelf rate for customers from 16% to 14.5%. Last year HDFC Bank and Kotak Mahindra had cut down the dealer commissions from 4-5% to around 2%. DSAs are an important component of the used car loan segment.
ICICI Bank has told agents to submit the files directly to the bank. Thus DSAs would get their commissions, but lose out on large volumes. Earlier, ICICI Bank had set a limit, based on which the DSAs funded the used car loans. But they used to take 90-120 days to complete the paper work regarding hypothecation.
Therefore bad debts increased from sub-1% levels to around 3%. ICICI Bank, which was among the largest used car loan financiers, gave away a mere Rs 20 crore last month. HDFC Bank and Kotak Mahindra disbursements were also low, with Kotak Mahindra’s outgoings falling by 30% in the past six months.
“The rejection rates for loan applications have gone up from 45% to 55%. However, sourcing from some company-owned dealerships has been good due to better customer profiles,” said Kotak Mahindra Prime CEO Sumit Bali. Usually used car finance rates are 3.5% higher than new car loan rates, and are currently floating at 17%. So on cutting down the dealer payouts, ICICI Bank has lowered the shelf rate from 16% to 14.5%.
“ICICI Bank has moved to a scenario of reduced dealership commissions and sourcing of partners. As a result, auto loan rates have realigned to about 14.5%,” said ICICI Bank head of car and commercial vehicle loans, Ravi Narayanan.
ICICI Bank has also slashed dealer commissions which in turn have resulted in a reduction in the shelf rate for customers from 16% to 14.5%. Last year HDFC Bank and Kotak Mahindra had cut down the dealer commissions from 4-5% to around 2%. DSAs are an important component of the used car loan segment.
ICICI Bank has told agents to submit the files directly to the bank. Thus DSAs would get their commissions, but lose out on large volumes. Earlier, ICICI Bank had set a limit, based on which the DSAs funded the used car loans. But they used to take 90-120 days to complete the paper work regarding hypothecation.
Therefore bad debts increased from sub-1% levels to around 3%. ICICI Bank, which was among the largest used car loan financiers, gave away a mere Rs 20 crore last month. HDFC Bank and Kotak Mahindra disbursements were also low, with Kotak Mahindra’s outgoings falling by 30% in the past six months.
“The rejection rates for loan applications have gone up from 45% to 55%. However, sourcing from some company-owned dealerships has been good due to better customer profiles,” said Kotak Mahindra Prime CEO Sumit Bali. Usually used car finance rates are 3.5% higher than new car loan rates, and are currently floating at 17%. So on cutting down the dealer payouts, ICICI Bank has lowered the shelf rate from 16% to 14.5%.
“ICICI Bank has moved to a scenario of reduced dealership commissions and sourcing of partners. As a result, auto loan rates have realigned to about 14.5%,” said ICICI Bank head of car and commercial vehicle loans, Ravi Narayanan.
Tuesday, January 20, 2009
A case against ICICI Bank for doing unfair trade practice
Another case of unfair trade practice by ICICI bank has come into lime light. For this the bank has been directed to pay Rs 20,000 as compensation to a complainant and Rs 2,200 as litigation costs. The District Consumer Disputes Redressal Forum found the bank guilty of deficiency in service after a sanctioned loan of Rs 1, 02,000 was shown to the complainant against the told Rs 91,000. The bank has also been directed to restore the loan account of the complainant.
The forum in its ruling said, “It is yet another case of unfair trade practice on part of the bank in disbursing the loan to a third party instead of the complainant and thereby causing a loss of Rs 11,000 to the complainant and benefiting their stooges by giving them benefit of the aforesaid amount”. The forum also blamed the bank of teaming up with the Car Bazaar in order to serve up their vested interests.
Surjit Kumar Gupta in his complaint stated that in November 2005, an ICICI executive approached him with the offer of financing his old car at a low rate of interest. At that time he was assured a loan of Rs 1 lakh with equated monthly installments (EMI) of 36 months. He was then given a cheque of Rs 91,000 with an EMI of Rs 3,560 every month. The complainant was regularly paying the installment but he was not satisfied with the service of the bank, therefore he approached it to clear the whole amount. According to him the outstanding amount shown by the bank at Rs 46,218 in October 2008, was highly inflated.
When the complainant asked for the explanation but the bank neither returned the excessive amount nor gave any satisfactory reply.
In its reply, to the forum the bank stated that the full amount of loan sanctioned was Rs 1,02,000 as availed by the complainant. Bank denied that it made a short disbursal of Rs 91,000.
The forum, headed by president Jagrup Singh Mahal, found merit in the argument that Max Car Bazar is being supported up by the employees of the bank in order to favor them with a wrongful gain and to cause a wrongful loss of Rs 11,000 to the complainant. The forum apprehended “The payment was made to Max Car Bazar instead of making the same directly to the complainant. It is an unfair trade practice on the part of the bank.”
ICICI plans New Year gift by slashing rates by 50-75 bps
ICICI Bank, the country’s largest private sector bank is planning to cut interest rates by 50-75 basis points across the board in the new year which will make home and car loans cheaper. A senior banker informed with direct knowledge of the development, the rate cut will happen “very soon” — maybe early next month.
However, ICICI bank will not do phased reduction in rates unlike its rival HDFC Bank. “Whatever reduction they go in for, it will be at one go,” the banker told ET. At present
ICICI’s prime lending rate (PLR) is 14.25%. Its home loan range extends to 11.5-12.25% for floating rates while the fixed rate is around 15.5%. In car loans, ICICI’s average is around 15%.
ICICI will implement rate cut uniformly to all its businesses. This would mean it will also make home loans and car loans cheaper. It would be quite different from HDFC Bank, whose rate cut left the home loan segment untouched because it’s under HDFC, which owns 19.4% stake in HDFC Bank.
The decision to reduce interest rates will come in support of the Reserve Bank’s cut in the repo and reverse repo earlier this month. However, some public and private sector banks have already announced rate cuts. Union Bank ofIndia
This year ICICI’s retail business saw a growth of around 5%. In contrast, its corporate business has grown at a 10-15% clip.
Although the corporate business is much smaller currently, being less than half of the retail business. The spiffy growth in the corporate business has generated rumor that ICICI might focus more on that segment but the bank says there is no intention to give less attention to retail business.
At present home loan rates across various banks stand around 10.5% for sub-Rs 20 lakh loans and around 12% for above Rs 20 lakh loans. On the other hand car loans stand around 12.5-16% depending on loan profile and kind of model chosen.
However, ICICI bank will not do phased reduction in rates unlike its rival HDFC Bank. “Whatever reduction they go in for, it will be at one go,” the banker told ET. At present
ICICI’s prime lending rate (PLR) is 14.25%. Its home loan range extends to 11.5-12.25% for floating rates while the fixed rate is around 15.5%. In car loans, ICICI’s average is around 15%.
ICICI will implement rate cut uniformly to all its businesses. This would mean it will also make home loans and car loans cheaper. It would be quite different from HDFC Bank, whose rate cut left the home loan segment untouched because it’s under HDFC, which owns 19.4% stake in HDFC Bank.
The decision to reduce interest rates will come in support of the Reserve Bank’s cut in the repo and reverse repo earlier this month. However, some public and private sector banks have already announced rate cuts. Union Bank of
This year ICICI’s retail business saw a growth of around 5%. In contrast, its corporate business has grown at a 10-15% clip.
Although the corporate business is much smaller currently, being less than half of the retail business. The spiffy growth in the corporate business has generated rumor that ICICI might focus more on that segment but the bank says there is no intention to give less attention to retail business.
At present home loan rates across various banks stand around 10.5% for sub-Rs 20 lakh loans and around 12% for above Rs 20 lakh loans. On the other hand car loans stand around 12.5-16% depending on loan profile and kind of model chosen.
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