Silver Point

Thomas J. Monaco

Independent Insight Provider

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Equity Bottom-Up

*Results Highly Reliant On Gains: Canara Bank (CBK.IN) [Canara] reported bottom-line results of INR 10.1 bn for FY 4Q21, improving INR 6.0 bn (85.5%) linked quarter. Results were driven one factor alone: am INR 9.3 bn (21.8%) increase in various sundry gains - securities, F/X, et al. As awe calculate, these various low quality items and gains amounted to INR 48.9 bn during FY 4Q21 or nearly 5x Canara’s stated bottom-line result; and  * Credit Leads To Solvency Concerns: Given the INR 27.3 bn in NCO, we calculate that annualized net new NPLs amount to 21.7%. We remain highly concerned about Canara’s credit outlook, given the concentrations of SMA loans, ‘BBB’ and below corporate, and MSME loans; and poor collection efficiency.  By our calculation, Canara’s loan loss reserve falls short by INR 674.0 bn or by 180.2% - representing 115% of Canara’s equity base and implying a lack of solvency.

*Results Highly Reliant On Gains: Canara Bank (CBK.IN) [Canara] reported bottom-line results of INR 10.1 bn for FY 4Q21, improving INR 6.0 bn (85.5%) linked quarter. Results were driven one factor alone: am INR 9.3 bn (21.8%) increase in various sundry gains - securities, F/X, et al. As awe calculate, these various low quality items and gains amounted to INR 48.9 bn during FY 4Q21 or nearly 5x Canara’s stated bottom-line result; and  * Credit Leads To Solvency Concerns: Given the INR 27.3 bn in NCO, we calculate that annualized net new NPLs amount to 21.7%. We remain highly concerned about Canara’s credit outlook, given the concentrations of SMA loans, ‘BBB’ and below corporate, and MSME loans; and poor collection efficiency.  By our calculation, Canara’s loan loss reserve falls short by INR 674.0 bn or by 180.2% - representing 115% of Canara’s equity base and implying a lack of solvency.

Canara Bank – India’s Trash Compactor

*Another Unwarranted Provision Reduction: Federal Bank’s (FB.IN) results were likely managed, as it posted FY 4Q21 bottom-line result of INR 4.8 bn – improving INR 737 mn (18.2%) linked quarter. One factor, which was simply ridiculous, given the state of Federal Bank’s balance sheet, drove the improvement – aggressively cutting loss provisions again; and*Reserve Cover Is Shallow: Net new problem loans increased INR 8.4 bn or 78.4% on an annualized basis – dangerously accelerating over FY 3Q21. We remain discouraged that management hasn’t taken the opportunity to more aggressively address the risk sitting pon balance sheet. In fact, we find that reserve cover is increasingly light by close to INR 84.5 bn (versus being short INR 50.0 bn just a quarter ago) – nearly 20 years of core operating performance.

*Another Unwarranted Provision Reduction: Federal Bank’s (FB.IN) results were likely managed, as it posted FY 4Q21 bottom-line result of INR 4.8 bn – improving INR 737 mn (18.2%) linked quarter. One factor, which was simply ridiculous, given the state of Federal Bank’s balance sheet, drove the improvement – aggressively cutting loss provisions again; and*Reserve Cover Is Shallow: Net new problem loans increased INR 8.4 bn or 78.4% on an annualized basis – dangerously accelerating over FY 3Q21. We remain discouraged that management hasn’t taken the opportunity to more aggressively address the risk sitting pon balance sheet. In fact, we find that reserve cover is increasingly light by close to INR 84.5 bn (versus being short INR 50.0 bn just a quarter ago) – nearly 20 years of core operating performance.    

Federal Bank – A Five Year Hole Has Developed

*Result Beat On Unwarranted Provision Reduction: Federal Bank (FB.IN) posted FY 3Q21 bottom-line results of INR 4.0 bn, exhibiting linked quarter improvement of INR 965 mn (31.4%). Two factors drove the bottom-line – one legitimate, the latter simply ridiculous: a) net interest income improved INR 571 mn (4.1%) tracking both loan growth of INR 26.0 bn (2.1%) and NIM improvement of 10 bp to 3.00%; and b) a drop of INR 1.7 bn (29.0%) in its loss provision despite an annualized net new problem loan increase of over 67%; and*Reserve Cover Is Shallow: If we look at coverage of total problem loans, which includes the restructured book, coverage amounts to just 59.0% versus 57.7% at FY 2Q21. Although we are encouraged by the linked quarter improvement, we do feel that reserve cover is quite light by close to INR 50.0 bn – nearly three years of bottom-line performance.

*Result Beat On Unwarranted Provision Reduction: Federal Bank (FB.IN) posted FY 3Q21 bottom-line results of INR 4.0 bn, exhibiting linked quarter improvement of INR 965 mn (31.4%). Two factors drove the bottom-line – one legitimate, the latter simply ridiculous: a) net interest income improved INR 571 mn (4.1%) tracking both loan growth of INR 26.0 bn (2.1%) and NIM improvement of 10 bp to 3.00%; and b) a drop of INR 1.7 bn (29.0%) in its loss provision despite an annualized net new problem loan increase of over 67%; and*Reserve Cover Is Shallow: If we look at coverage of total problem loans, which includes the restructured book, coverage amounts to just 59.0% versus 57.7% at FY 2Q21. Although we are encouraged by the linked quarter improvement, we do feel that reserve cover is quite light by close to INR 50.0 bn – nearly three years of bottom-line performance.    

India Financials

Saumya Agarwal

City Union Bank, the oldest Private sector Bank in India, has been focused on providing credit to the small and medium businesses in South India. Despite being a regional bank, its stock commands premium valuation vis-à-vis many other private sector banks. What is driving the superior valuation for this South- India focused Bank?

City Union Bank, the oldest Private sector Bank in India, has been focused on providing credit to the small and medium businesses in South India. Despite being a regional bank, its stock commands premium valuation vis-à-vis many other private sector banks. What is driving the superior valuation for this South- India focused Bank?

City Union Bank: What Is Driving Premium Valuation for This Oldest Private Sector Bank?

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

<a href="https://www.smartkarma.com/entities/yes-bank-ltd" target="_blank" data-smartkarma-citation="entities:767:1" rel="noopener">Yes Bank (YES IN)</a> aims to raise around US$2bn via a follow-on public offering. 
The deal is a follow-on public offering but has been priced more like a rights issues, with the discount being 41-46% to its undisturbed price and the company looking to double its share count. 
In this insight, I'll talk about the deal dynamics and run it through our ECM framework.

Yes Bank (YES IN) aims to raise around US$2bn via a follow-on public offering. 
The deal is a follow-on public offering but has been priced more like a rights issues, with the discount being 41-46% to its undisturbed price and the company looking to double its share count. 
In this insight, I'll talk about the deal dynamics and run it through our ECM framework.

Yes Bank Placement/FPO - Anchor Book Participants Are the Key

India

Federal Bank Limited operates branches and regional offices throughout India. The Bank offers a wide range of financial services, including merchant banking, international banking and foreign exchange, leasing facilities, money markets and agricultural advances. The Bank also provides lending for hi-tech agricultural and government sponsored schemes.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Federal Bank (FB IN)

Canara Bank – India’s Trash Compactor

CANARA BANK: Canara reported QOQ bottom-line improvement of 85.5%, reliant on gains. Net new NPLs amount to 21.7%, but its reserve shortfall...

Thomas J. Monaco

Federal Bank – A Five Year Hole Has Developed

FEDERAL BANK: FB's FY 4Q21 bottom-line QOQ result improved 18.2% due to an unwarranted provision cut. Net new NPLs accelerated 78.4% QOQ, while ...

Thomas J. Monaco

Federal Bank – Deserving No Credit

FEDERAL BANK: FB FY 3Q21 bottom-line results improved 31.4% linked quarter, as it dropped its provision 29.0% despite its annualized net new...

Thomas J. Monaco

City Union Bank: What Is Driving Premium Valuation for This Oldest Private Sector Bank?

City Union Bank, the oldest Private sector Bank in India has been commanding premium valuation vis-à-vis many other private sector banks. What is...

Saumya Agarwal

Yes Bank Placement/FPO - Anchor Book Participants Are the Key

Yes Bank (YES IN) aims to raise around US$2bn via a follow-on public offering. The deal is a follow-on public offering but has been priced more...

Sumeet Singh

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)