The stock of SBI surged on Tuesday despite reporting a quarterly loss of Rs.7718 crore for the March quarter. The net loss is the second highest for a PSU bank after PNB. It may be recollected that SBI had also reported a loss of Rs.2416 crore in the third quarter ended December 2017. The gross NPAs of the bank went up by 55 basis points and got closer to the 11% mark while the net NPAs were almost flat at 5.73%. The markets are now betting on the belief that with the NCLT process almost complete, there should be some relief for the PSU banks and SBI could be a key beneficiary.
Continuing on the subject of SBI, the bank proposes to sell a stake in its general insurance arm as well as its cards business and its investment banking arm, SBI Capital Markets. SBI will be looking to do this as part of its value unlocking strategy. SBI has already unlocked part of its value in SBI Life through the IPO last year. The bank is planning to bring in a partner and hive off a 24% stake in SBI Capital Markets. In the last few months, banking groups like ICICI and HDFC have been trying to monetize some of the value of their subsidiaries to reinvest more in their core business.
NSE has filed a case against the Singapore Exchange (SGX) in the Bombay High Court over the launch of its derivative products on the Nifty movement. The SGX Nifty was licensed to trade in the SGX for over 18 years but will have to discontinue the original product after the Indian exchanges took a decision not to supply live feeds to global exchanges. This has elicited angry responses from global exchanges as well as from MSCI. In fact, SGX has not decided to go ahead and launch derivatives on the NSE products based on closing prices. SGX futures are used by global funds to hedge their India exposure.
With Tata Steel’s acquisition of Bhushan Steel approved, the company has already put in a new management to manage the transition. The new board consisting of Rajeev Singhal as the MD and 3 non-executive directors has already been actioned. The board includes Shuva Mandal, who was instrumental in leading Ratan Tata’s legal battle against Cyrus Mistry. Bhushan Steel was the first of the large NCLT cases that now stands resolved and it opens the doors for the rapid completion of pending cases like Essar Steel, Electrosteel and Binani Cements which are at an advanced stage.
In what could have larger global repercussions, the US House has announced sweeping overhaul of banking regulations, which includes Trump’s favourite objection to the Dodd Frank Act. The Dodd Frank Act was passed post the financial crisis in 2008 to put severe curbs on financial services companies to reduce the systemic risk. However, industry and the financial sector have been aggressively lobbying to get this act either scrapped or diluted. The Act was passed in 2010 and the US House was of the view that it had done its job and was now curbing the growth of business. Smaller banks had criticised the Dodd Frank Act as too cumbersome and they could get some relief as the threshold for banks to face stricter legislation will now be raised from $50 billion to $250 billion.
The stock of Vedanta may come in under pressure on Wednesday after a protest at the Sterlite’s Thoothukudi plant in Tamil Nadu turned violent leading to the death of 11 people. This is not the first time that protests against the Sterlite Plant have turned violent. There have been previous protests against the pollutants released by the plant and there has been violence in the previous occasions also. This time around the violence also assumes political undertones as there is an AIADMK government at the centre which does not exactly enjoy popular support.
