October 06, 2005
Credit-Raising A Go-Go
Seems like everybody and his brother is out on the road now trying to sell some bank stock.
China Construction Bank is still in "pre-marketing" (how this is distinguished from "marketing" has always eluded me, and I've done both) for an offering which will raise $7.7bn at the top of the pricing range, but the institutional tranche is already reportedly covered. Even allowing for the prevaricatory nature of all in ECM who speak on such issues....not a bad showing. (that's what MS/CSFB/CICC are calling you about)
Mizuho is taking advantage of the run-up in Japanese bank stocks to push out $4.7bn of shares (not new but held by an older liquidation vehicle) so as to repay past government support. (Nikko/Citi/Mizuho, + MS/ML will be ringing your doorbell on this one)
Lone Star's Tokyo Star Bank (formerly Tokyo Sowa) is also on the road with Japanese investors, looking to raise up to $798m in its IPO. (a Citi/Nikko/CSFB joint, with bookbuilding 10/4-10/14 and pricing 10/17)
ECM Tid-bits: ICICI Bank's Board meets next week to discuss raising additional capital. State-owned competitor Union Bank has already applied to the government for permission to sell 45m new shares. Standard Chartered Bank (Thai) also plans to bolster equity, but with new capital coming exclusively from the parent, you're out of luck if you want any.
September 22, 2005
Indian Banking Consolidation: Myth or (Delayed) Reality?
"...competition levels have been increasing, but have not reached a point of unsustainability yet. Our banks are still able to sustain in the current form. Even less efficient banks are able to survive in this 'walled garden' where competition has not been allowed to freely come in. Though there are great opportunities in India, neither are private banks allowed to acquire PSBs nor are foreign banks granted a free entry."
"Moreover in any market, it is the leaders who enhance consolidation. But the leaders in Indian banking have no incentive to do this as they are doing relatively well in the 'walled garden'. They are not in a rush to play the role of the bridegroom. Thus, consolidation remains sub-optimal."
More after the jump:
Puri has been right on this issue before: in a 2001 piece for Mckinsey Quarterly (Revitalizing India’s banks, with Anu Madgavkar and Joydeep Sengupta) he went against the then-current wisdom that consolidation was imminent, saying:
"...full-scale foreign ownership of banks that are currently owned by the government is unlikely to come for at least three years, given the lack of political consensus on the issue and opposition to privatization."
H.N. Sinor, Chief Executive of the Indian Banks Association, disagrees, saying that despite "cynicism" over M&A we will "be seeing major consolidation efforts in the banking sector," citing "the need for efficient capital management under Basel-II norms which are likely to come into effect within 18 months."
September 18, 2005
HSBC to Issue Cards in India Without Income Proof
HSBC and hypermarket retailer Star India Bazaar have teamed up to launch a new co-branded credit card aimed at housewives. The Business Standard highlights that the card will be offered to applicants without an income verification requirement.
HSBC’s move to do away with the requirement of income proof, however, goes against the spirit of the RBI draft guidelines on credit cards that says banks must be responsible and issue cards only to those with independent financial means after completion of all know your customer (KYC) requirements.
Puneet Chaddha, head, cards and retail assets, HSBC, however, said, “Housewives will be the target customers for the card and this category of consuming class cannot be treated as without any income source. The credit limit on the card will be as low as Rs 3,000 to start with and is unlikely to create any credit hassles.” The card is being aimed at the 46.4 million consuming class households.
HSBC India does require minimum income on its regular and gold cards, along with verification documents.