Specialist in Indian Banking and Economic Research

Hemindra Hazari

The results of the State Bank of India (SBI), India’s largest and most prestigious bank, for the quarter ended June 30, 2017 (1QFY2018) highlighted some worrying issues: the inadequacy of additional equity capital in the face of mounting non-performing loans, and the surge in SBI’s non-performing retail loans (defined to include agricultural lending) at a time when most other banks are reporting robust retail asset quality. Although SBI maintains that the deterioration in asset quality is restricted to certain geographies and may be one-off, this analyst believes it is an ominous sign of things to come. Earlier, with the rapid growth of NPAs in corporate loans and industrial stagnation, corporate lending had stalled; the rise of retail loans was meant to compensate for that. Now the large spike in SBI’s retail loans is a worrying development.

The results of the State Bank of India (SBI), India’s largest and most prestigious bank, for the quarter ended June 30, 2017 (1QFY2018) highlighted some worrying issues: the inadequacy of additional equity capital in the face of mounting non-performing loans, and the surge in SBI’s non-performing retail loans (defined to include agricultural lending) at a time when most other banks are reporting robust retail asset quality. Although SBI maintains that the deterioration in asset quality is restricted to certain geographies and may be one-off, this analyst believes it is an ominous sign of things to come. Earlier, with the rapid growth of NPAs in corporate loans and industrial stagnation, corporate lending had stalled; the rise of retail loans was meant to compensate for that. Now the large spike in SBI’s retail loans is a worrying development.

SBI's Retail Slippages: Mere Blip, or Canary in the Coal Mine?

Thematic (Sector/Industry)

The surge in non-performing assets (NPAs) in the Indian banking industry disguises a lesser known issue of a larger percentage surge in bad loans from the overseas branches of banks, particularly from select new private sector banks having significant foreign ownership. While the growth in overseas NPAs is from a low base as compared with domestic NPAs, the quantum is not insignificant. Some of the banks adventurously ventured into overseas markets, but, it appears, ended up extending foreign currency loans to highly leveraged Indian companies, which may have resulted in significant contamination of their overseas portfolio and consequently a belated contraction of their overseas assets.

The surge in non-performing assets (NPAs) in the Indian banking industry disguises a lesser known issue of a larger percentage surge in bad loans from the overseas branches of banks, particularly from select new private sector banks having significant foreign ownership. While the growth in overseas NPAs is from a low base as compared with domestic NPAs, the quantum is not insignificant. Some of the banks adventurously ventured into overseas markets, but, it appears, ended up extending foreign currency loans to highly leveraged Indian companies, which may have resulted in significant contamination of their overseas portfolio and consequently a belated contraction of their overseas assets.

Senior investment analyst

Pallavi Deshpande

Equity Bottom-Up

The Reserve Bank of India's (RBI) recent circular requiring banks to disclose divergence in NPL classification and provisioning caused a lot of pain to the new private sector banks, however, <a href="https://www.smartkarma.com/entities/160" target="_blank" data-smartkarma-citation="entities:160:1">State Bank Of India's (SBIN IN)</a>(SBI) chose not to make similar disclosures and saved itself from the pain. We believe SBI was busy preparing for the merger and the clean-up of books took a back seat, with the above dispensation from the RBI being a quid-pro-quo for complying with its merger dictate. You can…

The Reserve Bank of India's (RBI) recent circular requiring banks to disclose divergence in NPL classification and provisioning caused a lot of pain to the new private sector banks, however, State Bank Of India's (SBIN IN)(SBI) chose not to make similar disclosures and saved itself from the pain. We believe SBI was busy preparing for the merger and the clean-up of books took a back seat, with the above dispensation from the RBI being a quid-pro-quo for complying with its merger dictate. You can…

SBI: Rises Above the Law as It Complies with RBI's Merger Dictate

Founder, Riedel Research

David Riedel

Founder

Independent equity research on GEM Markets

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<ul>
<li>Our proprietary corporate governance scoring system now covers over 1,725 stocks including nearly 200 Banks and Financial Institutions.</li>
<li>This report includes all of the Banks and Financial Institutions currently under coverage.</li>
<li>The lowest score in this group is Bank of Baroda from India (30/100).</li>
<li>The Financials outside of Asia have slightly better governance.</li>
<li>Banks in Saudi and GCC score very high.</li>
<li>We would be happy to provide the detail on the scores if that is of interest.</li>
<li>Our clients routinely ask…</li>
</ul>


Our proprietary corporate governance scoring system now covers over 1,725 stocks including nearly 200 Banks and Financial Institutions.
This report includes all of the Banks and Financial Institutions currently under coverage.
The lowest score in this group is Bank of Baroda from India (30/100).
The Financials outside of Asia have slightly better governance.
Banks in Saudi and GCC score very high.
We would be happy to provide the detail on the scores if that is of interest.
Our clients routinely ask…


Corporate Governance at Banks in Emerging Markets - Scores on Over 150 Names - Many Widely Held

Post the Bharatiya Janata Party’s (BJP) decisive victory in the Uttar Pradesh (UP) state elections, alarm bells have commenced tolling in the capital market.  The cause for concern is the BJP’s promise to the UP electorate to waive off all farm loans and provide fresh loans at zero per cent interest. Media, capital market analysts and prominent bankers have jumped on the bandwagon of moral hazard, ruining the loan payment discipline amongst farmers and apprehensions that the sacrosanct fiscal deficit may be breached as a consequence of such ‘populist’ policies. The BJP electoral promise raises some issues which need to be explored further on whether the central government has the fiscal space to provide for a total farm waiver and whether the criticism of moral hazard is credible.

Post the Bharatiya Janata Party’s (BJP) decisive victory in the Uttar Pradesh (UP) state elections, alarm bells have commenced tolling in the capital market.  The cause for concern is the BJP’s promise to the UP electorate to waive off all farm loans and provide fresh loans at zero per cent interest. Media, capital market analysts and prominent bankers have jumped on the bandwagon of moral hazard, ruining the loan payment discipline amongst farmers and apprehensions that the sacrosanct fiscal deficit may be breached as a consequence of such ‘populist’ policies. The BJP electoral promise raises some issues which need to be explored further on whether the central government has the fiscal space to provide for a total farm waiver and whether the criticism of moral hazard is credible.

U.P. Loan Waiver: 'Populist' or a Necessity?

India

Bank of Baroda owns and operates commercial banks in India.  The Group's banks provide the traditional forms of banking services, including CD's, Credit Card services and a variety of car loans, in addition to gold banking and a range of insurance services.  The Group also owns IBU International Finance Limited, an international banking company in Hong Kong.

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Bank Of Baroda (BOB IN)

SBI's Retail Slippages: Mere Blip, or Canary in the Coal Mine?

The results of the State Bank of India (SBI), India’s largest and most prestigious bank, for the quarter ended June 30, 2017 (1QFY2018) highlighted...

Hemindra Hazari

Chickens Abroad Come Home to Roost

The surge in non-performing assets (NPAs) in the Indian banking industry disguises a lesser known issue of a larger percentage surge in bad loans...

Hemindra Hazari

SBI: Rises Above the Law as It Complies with RBI's Merger Dictate

The Reserve Bank of India's (RBI) recent circular requiring banks to disclose divergence in NPL classification and provisioning caused a lot of...

Pallavi Deshpande

Corporate Governance at Banks in Emerging Markets - Scores on Over 150 Names - Many Widely Held

Our proprietary corporate governance scoring system now covers over 1,725 stocks including nearly 200 Banks and Financial Institutions. This...

David Riedel

U.P. Loan Waiver: 'Populist' or a Necessity?

Post the Bharatiya Janata Party’s (BJP) decisive victory in the Uttar Pradesh (UP) state elections, alarm bells have commenced tolling in the...

Hemindra Hazari

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