Movement in BSE BANKEX vis-à-vis BSE 500 (Q4 FY09)
The banking sector, which had seen good set of numbers in the third quarter, reported subdued earnings in the fourth quarter of 2008-09 due to slowdown in credit growth and pressure on interest margins. The earnings performance of banking universe remained muted in fourth quarter due to lower business growth, negative impact of hardening interest rates and provisions made for concessions on restructured accounts. With inflation at nearly 0%, the threat of deflation is looming. The RBI has, thus, shifted its focus from controlling inflation to stimulating growth. We saw a series of rate cuts on part of the RBI during the past six months. For the quarter ended March 2009, we saw a 50 bps reduction in CRR to 5%, 150 bps reductions in both repo and reverse repo rate to 5% and 3.5%, respectively. State bank of India, Canara Bank and Bank of Baroda has significantly improved net profit among public sector banks while Axis Bank and Yes Bank performed better than the expectation.
Banking in Q4 FY 09
Public Sector Banks
State Bank of India
State Bank of India (SBI) reported a 45.5% jump in standalone net profits to Rs 2,742 crore in Q4FY09 mainly supported by treasury gains which jumped five times to Rs 1,500 crore from Rs 296 crore. The bank achieved robust growth in its operations as its advances and deposits grew by 29% and 38% YoY, respectively, with rising market share. Full year PAT surged 35.5% to Rs 9,121 crore with NII growth of 22.6% to Rs 2,0873 crore. On the non-interest income side, SBI reported a 46% YoY growth in FY09 to Rs 1,2691 crore. The asset quality appears less vulnerable at 2.84% GNPA with restructuring done worth Rs 8,300 crore (1.5% of loan book) during FY09. The cost to income ratio improved from 49% to 46.6%.
Bank of India
Bank of Baroda
Private sector Banks
Banking on Bourses
During Q4FY09, PE multiple of BSE-500 index hovered in the range of around 11x to 14x. During last week of March it touched the high of 13.93x while low was in January 2009 to 11.35x. While BSE Bankex’s PE multiple moved in a range of 5x to 11x during the quarter and reported lowest in the 2nd week of March to 5.94x while highest in the first week of the January to 10.64x.
Top Ten Performers in BANKEX (Based on closing prices)
Conditions in global financial markets deteriorate with the freezing of inter-bank markets in US and Europe necessitating massive liquidity injection facilities from central banks in these economies. Reduction of policy rates, recapitalization of troubled private banks by governments, coordinated action by European governments to bail out weak banks and guaranteeing of all deposits in the banking system in many countries. During fourth quarter earning report of banking sector was passable. Hopes for a recovery of the global financial sector were boosted when JP Morgan Chase reported better-than-expected quarterly profits after a record performance at its investment bank. JP Morgan made a profit of USD2.1bn, or USD0.40 a share, in the first three months of the year. Although that was lower than the USD2.4bn result achieved a year ago, it beat analysts' consensus forecast of a profit of USD0.30 a share. Goldman Sachs reported a 13% surge in quarterly profits to USD1.66bn, also better than expected. The results sparked hopes that the banking sector may be on the road to recovery. Wells Fargo also stunned markets last week when it declared it had finished its best quarter ever. The San Francisco-based bank said it expected to report first-quarter profits of about USD3bn. European central Bank and Bank of England slashed its benchmark to boost economic growth and increase the availability of credit.
Tuesday, June 2, 2009
Banking Sector Review
Posted by Morgan at 8:20 AM