Select Your Language

Banks marching ahead with renewed confidence

 There is always cutthroat competition among the investment banks to lobby share sale mandate from the government is very well known as they charge no fee at all , for example standard chartered bank which has not make any mark in the IPOs is now extending the fee less work to the Union Bank of India’s Rs 1386 crore qualified institutional placements for a token amount of Rs1 , the bidding process for fund raising is complete by this state owned bank is enquiring other arrangers to match the lowest price.

 Now it’s quite possible that the bank will do the issue with either one investment manager or with differential pricing for other relative lower bidders amongst a dozen merchant bankers like Axis Capital, Merrill Lynch, SBI Cap, ICICI Securities who participated in the bidding process .Usually an issuer enquires for the bids from the qualified investment bankers which only helps build the issuance and usually they place their structure of commission around 0.25% to 1% .

Few months back State Bank Of India which happens to be a giant lender had come out with a bigger Qualified Institutional Placement (QIP) and proposed to pay Rs21 crores or 0.3% of Rs7K crores and even some prominent global bankers could not make the issuance a success until the LIC India along with SBIs loyal clients came in to bail them out and this only goes on to prove the status and stature of SBI and Union Banks as the Union Bank I still undecided about the timing of floating the issue and has to be done till Sept next year.

 Now even the Government has plans to disinvest in its top companies, so the state owned Union Bank Of India is raising funds to muster up its capital base .The important point to note is that in the first quarter the bank’s capital adequacy ratio i.e. the minimum capital requirement in proportion to loans was 10.41% and as per the international regulatory frame work the minimum total capital adequacy (CAR) requirement is 11.5% which will be managed by the end of this financial year. Even the HDFC Bank proves that it’s the dark horse as it gets the HSBCs Asia Super ten tag beating ICICI Bank.

HSBC in itself a big Asian brokerage House has included HDFC in the top ten stocks portfolio, and looking back it has underperformed against the BSE Bankex year till date hovering around 8% and is an clear opportunity for the investors to enter the stocks, the bank may get the nod for higher foreign limit and other factors will boost up the picture. The bank has given excellent return on assets (ROA) of around 1.6 to 2% over the years , return on equity(ROE) of around 21% ,net interest margin (NIM) of around 4.5%  reflecting a great management and defensive nature of the bank’s earnings and a great healthy assets book, future is bright .