Imagine selling rock guitars when classical music comes into vogue! Surely, a difficult external environment can overwhelm the best of them. B&E profiles three key sectors that merit a mention for profitable or not-so-profitable reasons. psus, of course have been included for their prominence in the list
Market capitalisation of ICICI bank (on June 24, 2008) was at $18.01 billion (as compared to SBI’s mcap of $17.71 billion); ample reasons to suggest why Brand Finance Plc. has rated the brand value & mcap of ICICI as ‘very strong’; HDFC bank has been rated strong on the same parameters. Going by the current rate of growth and promises that the new players show (AXIS, HDFC & ICICI banks have respectively registered 62%, 39% & 34% surge in profitability), the day may not be too far when more of them occupy the coveted B&E Power 100 ranks. For the last couple of years, the industry has been posting healthy annual growth rates of over 20%, its profit pool is all set to increase to $20 billion by 2010 and $40 billion by 2015 (BCG estimates).
On parameter to parameter basis, private players have given a beating to their public sector counterparts on all fronts. Notwithstanding the global crisis, net profits of private players, even in the tumultuous Q4, was much higher than the others; their growth in net profit was pegged at 46.45% as compared to 28.06% for public sector players. The impact of the global credit crisis and liquidity crunch was very limited and primarily affected banks with international operations to some extent. Nevertheless, the slowdown in the global economy and the Q4 debacle did make its impact; explains Ajinkya Dhavale, Analyst, Motilal Oswal, “In Q4, the Bankex declined by 27% mainly due to uncertainties and concerns on account of – farmer loan waiver as announced by the FM, large derivatives exposures of private banks on behalf of clients, MTM provisions on international investments and mounting inflation and slowing industrial/manufacturing activity.” Agrees Abhishek Agarwal, Research Analyst, Religare Securities Limited, “Major impediments were moderation of credit demand, increase in inflation and interest rates, MTM losses on credit derivatives exposure and defaults in retail segments, especially in the last quarter.” Despite all these hiccups in the last quarter of FY ’08, the average interest and income earned by 16 private banks was 35.5% and 33.40% respectively. Increased emphasis by private players on international operations has contributed a huge chunk to their revenues. The limited downside risks associated with banks, stable outlook and strong corporate profitability and comfortable liquidity conditions are suggestive of future prospects. According to a Pricewaterhouse Coopers report, India is likely to emerge as the third largest banking hub in the world by 2040. The projections hold true despite the global financial market downturn; more so after the Bear Stearns fiasco in the last quarter.
Market capitalisation of ICICI bank (on June 24, 2008) was at $18.01 billion (as compared to SBI’s mcap of $17.71 billion); ample reasons to suggest why Brand Finance Plc. has rated the brand value & mcap of ICICI as ‘very strong’; HDFC bank has been rated strong on the same parameters. Going by the current rate of growth and promises that the new players show (AXIS, HDFC & ICICI banks have respectively registered 62%, 39% & 34% surge in profitability), the day may not be too far when more of them occupy the coveted B&E Power 100 ranks. For the last couple of years, the industry has been posting healthy annual growth rates of over 20%, its profit pool is all set to increase to $20 billion by 2010 and $40 billion by 2015 (BCG estimates).
On parameter to parameter basis, private players have given a beating to their public sector counterparts on all fronts. Notwithstanding the global crisis, net profits of private players, even in the tumultuous Q4, was much higher than the others; their growth in net profit was pegged at 46.45% as compared to 28.06% for public sector players. The impact of the global credit crisis and liquidity crunch was very limited and primarily affected banks with international operations to some extent. Nevertheless, the slowdown in the global economy and the Q4 debacle did make its impact; explains Ajinkya Dhavale, Analyst, Motilal Oswal, “In Q4, the Bankex declined by 27% mainly due to uncertainties and concerns on account of – farmer loan waiver as announced by the FM, large derivatives exposures of private banks on behalf of clients, MTM provisions on international investments and mounting inflation and slowing industrial/manufacturing activity.” Agrees Abhishek Agarwal, Research Analyst, Religare Securities Limited, “Major impediments were moderation of credit demand, increase in inflation and interest rates, MTM losses on credit derivatives exposure and defaults in retail segments, especially in the last quarter.” Despite all these hiccups in the last quarter of FY ’08, the average interest and income earned by 16 private banks was 35.5% and 33.40% respectively. Increased emphasis by private players on international operations has contributed a huge chunk to their revenues. The limited downside risks associated with banks, stable outlook and strong corporate profitability and comfortable liquidity conditions are suggestive of future prospects. According to a Pricewaterhouse Coopers report, India is likely to emerge as the third largest banking hub in the world by 2040. The projections hold true despite the global financial market downturn; more so after the Bear Stearns fiasco in the last quarter.
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
and Arindam Chaudhuri (Renowned Management Guru and Economist).
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