Even as ICICI Bank has had its trust on trial in recent times, the fourth quarter results were an absolute disappointment. The profits halved to Rs.1020 crore even as the gross NPAs shot up from 7.89% to 8.84%, making it the most stressed private bank in India. Net NPAs were marginally down at 4.77% due to higher provisioning. In absolute terms, the gross NPAs of the bank shot up by Rs.15,737 crore during the quarter. The net interest margin at 3.24% is the lowest among the larger privet banks in India. However, the bank was entirely silent on the conflict of interest issue.
On a day when the Brent Crude crossed $75/bbl, the INR crashed to a 15-month low and breached the Rs.67/$ mark. There was a strong demand for dollars from importers and banks trying to cover their un-hedged positions in the forex market. There was also visible intervention from the RBI as the central bank tried its best to prevent the INR from going into a free fall. The INR is already the worst performing currency in Asia having lost 5.1% since January this year. FIIs have also been net sellers in the equity segment after having sold over $3 billion last month.
SEBI has written to the government of India seeking parity in imposition of STT between spot and derivatives. Currently, the STT on futures is lower than on equities, and in case of options the STT is still lower as it is levied on the premium rather than on the notional value. In fact, this was one of the factors that had led to a spurt in options volumes in India. Now SEBI wants the parity in STT to be restored as the tax differential was encouraging the F&O segment at the cost of the equity segment. This was also dangerous as it was creating a speculative bubble in the markets.
The DSP group, one of the oldest financial services houses in India, is planning to buy out the minority stake of Blackrock in its DSP Blackrock joint venture. DSP Blackrock then proposes to revert to its old name of DSP Investment Managers. The JV currently manages over Rs.110,000 crore in equity, debt and alternatives put together and has over 2 million individual investors. The shift happened after Blackrock globally took over Merrill Lynch’s global asset management business in 2006. DSP has had one of the best performing mid-cap funds in India.
With both the BJP and the Congress promising liberal sops to the farmers of Karnataka ahead of the state elections, the banks are likely to face a total hit of Rs.88,000 crore from farm loan write offs. In fact, economists have been cautioning against this type of a policy, which was first tried out by the BJP in Uttar Pradesh. While it did fetch the votes for the party, it put a severe strain on the banks and specifically the NBFCS and the MFIs which acted as the last-mile conduit for rural lending. That was one of the reasons that Ujjivan had seen a steep fall on Monday considering its large exposure to small ticket loans in Karnataka. While the loan write-offs in Karnataka are relatively smaller, the states of Uttar Pradesh and Maharashtra accounted for nearly 70% of the total write-offs of farm loans.
In what will be one of Nestlé’s biggest business gambles, it will be paying $7.15 billion to Starbucks for the rights to market Starbucks products ranging from beans to capsules across Nestle stores. While Nestle has its own products like Nespresso and Dolce Gusto, it has never been able to make the kind of impact that Starbucks could make globally with its 28,000 outlets across the world. Nestle has had a strong presence in Europe and Asia but was almost absent in the US. Now this deal is expected to give Nestle the much needed foothold in the American markets.
