Re: {LONGTERMINVESTORS} Must read good reports - Thread
Rajesh Desai
INDIA STRATEGY: Pit-stop ... prolonged!
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CA. Rajesh Desai
Rajesh Desai
Indian Markets: Bracing for a likely fiscal wobble?
PFA--On Fri, Sep 6, 2013 at 12:12 PM, Arjuns Vision <arjuns...@gmail.com> wrote:
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CA. Rajesh Desai
CA. Rajesh Desai
Rajesh Desai
Respected Rajesh Desaiji,Please share a few good Diwali picks Reports.
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CA. Rajesh Desai
Rajesh Desai
Please find attached Moody's latest Banking System Outlook on India for your reference.
Our outlook for the Indian banking system is negative. The outlook expresses our expectation of how bank creditworthiness will evolve in this system over the next 12-18 months
Our outlook for the Indian banking system is negative, as it has been since November 2011. The negative outlook reflects our views that economic growth will be weak, banks’ asset quality will deteriorate, and profitability will decline because banks need to increase loan loss reserves and will not be able to fully pass on rising funding costs or offset these through loan growth. As a result, public-sector banks will remain dependent upon government injections to maintain their capitalization levels. The banks’ stable funding and strong systemic support only partly offset the negative drivers.
Our negative outlook on the Indian banking system pertains mainly to the public-sector banks. Public-sector banks represent more than 70% of total banking system assets. They have also experienced larger growth in nonperforming and restructured loans, as well as greater weakening in profits. These trends are likely to continue for public-sector banks. In contrast, private-sector banks have stronger margins, reserves, and capital levels, which will serve as buffers in a more challenging environment.
Economic growth will be the weakest in over a decade. We recently lowered our forecast for Indian economic growth for the fiscal year ending March 2014 (FY2014) to 4.5% from 5.5%, the lowest since the FY2003.1 The downward adjustment was driven by the increase in inflation risk in conjunction with the rupee’s depreciation. The Reserve Bank of India (RBI) has raised policy rates to contain rising inflation at the expense of growth.
Asset quality will deteriorate. Nonperforming loans (NPLs) and restructured loans will rise in particular at public-sector banks that lend heavily to infrastructure projects. A combination of higher costs for imported inputs and inflexible tariffs will prompt more delays and restructuring of infrastructure projects. While recent reforms, such as Coal India’s plans to increase domestic production and moves to lift the ban on iron ore mining, will help sectors such as power and steel, the full benefit of reforms will take time. Weaker prospects for growth and higher inflation also add to the challenges for highly leveraged corporate sectors.
Please see attached full commentary for your reference.
Moody's maintains negative outlook on India's banking system
Singapore, November 18, 2013 -- Moody's Investors Service has maintained its negative outlook on India's banking system, reflecting the negative effects of currency volatility, persistent inflation, and slowing economic growth.
Asset quality will continue to deteriorate, particularly for public sector banks. At the same time, profitability will likely remain weak, limiting internal capital generation.
"The operating environment for India's banking system continues to exert negative pressure on ratings of many public sector banks. While structural issues related to the infrastructure sector are not new, the recent downturn in economic growth has exacerbated these problems and increased their negative effects on asset quality," says Gene Fang, a Moody's Vice President and Senior Analyst.
Fang was speaking on a just-released Moody's report titled, "India Banking System Outlook." The report details Moody's expectation of how bank creditworthiness will evolve in this system over the next 12-18 months.
While asset quality for private sector banks has largely remained stable, the combination of nonperforming loans and restructured loans has grown as a percentage of gross loans at public sector banks. Reserves for loan losses remain weak, and further provisions to sustain coverage will reduce profitability.
At the same time, systemic support remains strong, as evidenced by recently announced allocations of government funds to bolster capital at public sector banks. Moody's expects government support for this sector to be sustained, regardless of the 2014 election outcome.
Moody's report also highlights that Indian banks continue to have sound liquidity metrics, underpinned by a sizable domestic deposit base and minimal reliance on wholesale funding.
"As India is currently coping with adjustments related to the economic cycle, how growth rebounds next year will have an impact on the credit profiles of Indian banks. In addition, continuation of reforms in infrastructure after next year's election could contribute positively to the health of banks' balance sheets," says Fang.
Moody's rates fifteen banks in India -- eleven public sector banks and four private sector banks -- and incorporates government support in the ratings of all these banks.
CA. Rajesh Desai
Rajesh Desai
CA. Rajesh Desai