Banking and Financial Service-Industry Monitor-Jan 10

8/9/2019 Banking and Financial Service-Industry Monitor-Jan 10

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Cygnus Business Consulting & Research Pvt. Ltd. 2010 1

Vol.1001

CONTENTS

INDUSTRY AT A GLANCE ....................................................................................................2

KEY DEVELOPMENTS ..........................................................................................................3

MARKETING .......................................................................................................................3

OPERATIONS ......................................................................................................................3

INVESTMENT......................................................................................................................5

MERGERS AND ACQUISITIONS ......................................................................................5

INDUSTRY STATISTICS .........................................................................................................7

SERVICE FOCUS......................................................................................................................9

Mobile Banking.......................................................................................................................9Introduction........................................................................................................................9Global Overview.................................................................................................................9

Mobile Banking Business Models ......................................................................................10Mobile Banking services....................................................................................................10Business and Service opportunities....................................................................................11Outlook............................................................................................................................11

COMPANY SCAN...................................................................................................................12

Corporation Bank.................................................................................................................12Performance Analysis........................................................................................................13Common Size Comparison ...............................................................................................13Cost structure....................................................................................................................14Stock Performance............................................................................................................14

Outlook............................................................................................................................14

STOCK SCAN .........................................................................................................................15

UPCOMING EVENTS ...........................................................................................................17

Industry Monitor

Banking &Financial Services


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Industry Monitor Banking & Financial Services January 2010


INDUSTRY AT A GLANCE

MARKETING

McCain, Cantwell sponsor bank bill, USA RBI wants information on banks MF exposure cut, India IDBI Bank takes a cue from SBI, to offer home loan at 8.25%, India Indiabulls to enter infra financing, India

OPERATIONS

US to cast sanctions net wider after US$536m Suisse settlement JP Morgan tops ECM rankings, with US$2.2bn in fees, USA France sets up bank windfall tax Deutsche Bank staff to share burden of bonus tax, Germany Additional counters at RBI for paying income-tax, India Banks may get to hawk policies of multiple insurers, India RBI alerts RRBs on transactions with Iran, Pakistan, India Nepal to open banking sector to foreign players

INVETSMENTS

Union Bank of India raises authorised capital to Rs30bn, India

MERGERS AND ACQUISITIONS

ANZ bank silent on AMP rumour, focused on ING deal, Australia Syndicate Bank eyes Bharti stake in AMC, India Kotak, Renaissance tie up for M&A advisory services in CIS, Africa, India LS approves merger of State Bank of Saurashtra with SBI, India


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KEY DEVELOPMENTSMARKETING

AmericaUSA: McCain, Cantwell sponsor bank billTwo senators, including Washington State Democrat Maria Cantwell, have called for breaking up largefinancial firms that perform both commercial and investment banking, adding a wrinkle to alreadydifficult Senate talks on how to regulate Wall Street. Cantwell and Sen., John McCain, R-Ariz., on recentlyintroduced legislation that would bar commercial banks from undertaking brokerage activities. Democratsintroduced a similar bill in the House. Under the Senate legislation, financial firms operating commercialbanks and investment houses would have to decide whether to focus on commercial banking orinvestment banking. Commercial banks would be banned from engaging in insurance activities. TheHouse recently passed a bill that would overhaul US financial rules in response to last year's US$700billion taxpayer-funded bank bailout and in an effort to prevent future crises. The legislation includedgovernment authority to break apart large, healthy firms whose size threatens the economy and to seize

and unwind failed companies whose collapse in bankruptcy could disrupt the financial system.Asia-PacificIndia: RBI wants information on banks MF exposure cut

The Reserve Bank of India (RBI) has sought details from banks on action taken to curtail investments inmutual funds. RBI wrote to all commercial banks quizzing them about their exposure to mutual fundsand the steps taken to reduce such exposure. It may be recalled that after presenting the half-yearly creditpolicy in October, RBI governor had expressed concern over banks parking surplus money in mutualfunds.The concern is largely because over 90% of the money parked by banks in mutual funds comesback to banking system in the form of borrowings (made by banks) from the overnight market. RBI hasalso advised them to set an internal limit approved by the board and asked for exposure details in mutualfunds for the March-September 2009 period and the latest exposure.

India: IDBI Bank takes a cue from SBI, to offer home loan at 8.25%Taking a cue from biggies like SBI, ICICI Bank and HDFC, state-owned IDBI Bank recently joined thehome-loan war by offering 8.25% fixed rate for all its new loans till March 2012. The offer is applicable toall new home-loan customers applying on or before March 31, 2010, and taking a part or fulldisbursement during the offer period. After the offer period, interest rate will be charged based on thethen prevailing floating rates. Presently IDBI Bank is offering 8.75% for loans up to Rs3 million, 9% forloans between Rs3 million and up to Rs5 million and 9.25% for loans above Rs5 million. Country's largestlender, State Bank of India set the ball rolling by announcing a scheme offering an 8% interest rate earlythis year. The scheme, earlier scheduled to end in November, was extended till March 2010, following ahuge demand from the market.

India: Indiabulls to enter infra financingTo capitalise on the growing emphasis on infrastructure projects and the growing need for financing such

projects, Indiabulls Financial Services Ltd (IBFSL) is venturing into the infrastructure and constructionequipment financing space. IBFSL is targeting to disburse about Rs80 billion in the next one year. Thecompany is also ramping up its commercial vehicle finance and plans to launch auto loans products nextmonth. IBFSL is venturing into these two financing businesses through a wholly owned subsidiaryIndiabulls Infrastructure Credit Ltd (IICL). The plan is to infuse capital worth about Rs10 billion intoIICL and then scale up its operations.

OPERATIONSAmericaUSA: US to cast sanctions net wider after US$536m Suisse settlementCredit Suisses surprise US$536m settlement of a US investigation of financial dealings with Iran andother embargoed countries should do only short-term damage to the Swiss bank, but others could now be

in the line of fire. The bank also admitted to violating US economic sanctions by hiding the booming


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illegal business it was doing for Iranian banks and others. The US justice department announced thesettlement recently, saying it was the biggest forfeiture to date against a company for violations of thattype.The amount US$536m will be split between the US government and the district attorneys office inManhattan, which took part in the settlement talks with the bank along with the Federal Reserve and the

Treasury. The US officials said the government was continuing to investigate the handling of Iranianfunds by big banks in the west. All payments made in dollars must be processed through banks or bankoffices in the US, subjecting the transactions to US laws even if the parties are abroad. US courtdocuments in the Credit Suisse case show a total value of all banned transactions with Iran, Sudan,Myanmar, Cuba and Libya that exceeded US$1.6bn.

USA: JP Morgan tops ECM rankings, with US$2.2bn in feesIn the lucrative business of underwriting and selling a company's stock, JP Morgan led the world's banksthis year, earning an estimated US$2.2 billion in fees, or nearly double what it hauled from the deals lastyear. Across the investment banking industry, Equity Capital Market (ECM) underwriting was the maindriver of fees, marking a change in a sector. Global ECM activity reached $888.9 billion this year, up 27.7percent from 2008. Of that total figure, follow-on activity totalled $689 billion, with nearly half of that

coming from banks seeking capital after the financial crisis took its toll. JP Morgan Chase & Co's (JPM.N)top ECM status this year came from 383 deals worth US$98.5 billion. It earned a No. 2 spot on the globalECM rankings (255, US$76.5 billion). The third slot went to Bank of America Corp (BAC.N) (300,US$71.2 billion), a surprising bump up from No. 4, given the turmoil that hit the bank beginning late lastyear.

EuropeFrance: France sets up bank windfall tax

The French government said it was to go ahead with a windfall tax on bank bonuses as in Britain but ithas left wiggle room to ensure that its banking industry is not unfairly penalised. Christine Lagarde,finance minister, said Paris would use the proceeds of the tax to boost its bank deposit guarantee scheme,describing it as an exceptional tax in an exceptional circumstance. The French Banking Federation

criticised the new tax.

Germany: Deutsche Bank staff to share burden of bonus taxGlobal staff at Germany's largest bank, Deutsche Bank, will share the burden of a 50% British tax onbonuses. The British government has slapped the 50% tax rate on bank employee bonuses above 25,000pounds (28,000 euros, 40,400 dollars) to recoup cash spent rescuing the financial sector. Finance minister

Alistair Darling said the one-off levy would be spent on helping the unemployed, while the bankingindustry said the plan would push bankers to find work abroad.Excessive risk-taking by banks -- whichhave been rescued by governments on several continents in a series of costly bailouts -- has been blamedfor fuelling the global financial crisis and sparking a global recession. But Chairman, Josef Ackermannsaid he opposed government interference in the amount of pay workers received. "Bonuses should be theresult of supply and demand for skilled people," he said.

Asia-PacificIndia: Additional counters at RBI for paying income-taxKeeping in view the increase in influx of people depositing income tax dues at Reserve Bank of Indiacounters, additional counters have been opened in the bank. In order to obviate the inconvenience due toincrease in the number of tax payers at the eleventh hour, they are requested to deposit their income taxdues sufficiently in advance well before the last date. In addition to this, the bank has also opened thefacility for depositing income tax by cash or cheque at 144 branches of public sector banks including StateBank of India and four other private sector banks. Further, tax payers are therefore, requested to takeadvantage of these arrangements and to deposit taxes well before the last day.


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India: Banks may get to hawk policies of multiple insurersThe Insurance Regulatory & Development Authority (IRDA) is expected to allow banks to sell insuranceproducts of more than one service provider, allowing banks to retail insurance products and not just bedistributors for one insurer. IRDA had allowed bancassurance from 2002. Under the norms, a bank was

allowed to act as an agent for only one life and one general insurer. Bancassurance is a delivery channel in which insurance company uses a banks sales channel to sell its products. Currently, bancassuranceaccounts for more than a quarter of the entire premium collected by the insurance industry.Of the 23 lifeinsurance companies nine are promoted by banks while three out of 21 general insurance companies havebanks as promoters. Scheduled commercial banks, co-operative banks and regional rural developmentbanks put together, India has close to 1,70,000 bank branches. While in the last financial year privateinsurers had paid just above Rs2 billion as commission for bancassurance, the non-life insurers hadforked out more. Banks are expecting the commission to multiply manifold once they are allowed to sellproducts of various service providers. Rating agencies points out that this trend will help the banks to

withstand fall in the income from lending operations.

India: RBI alerts RRBs on transactions with Iran, Pakistan

The Reserve Bank has directed regional rural banks to keep a watch on transactions of customers withcountries like Pakistan and Iran since concerns have been raised about the rules there in combating terrorfunding. Regional Rural Banks are accordingly advised to take into account, risks arising from thedeficiencies in Anti-Money Laundering (AML), Combating the Financing of Terrorism (CFT) regime ofIran, Uzbekistan, Pakistan, Turkmenistan and Sao Tome and Principe. The notification follows concernsraised by the Financial Action Task Force (FATF), an inter-governmental body, regarding AML and CFTnorms in these countries. Last month, the Reserve Bank had issued a similar direction to commercialbanks on transactions of customers with these countries.

Nepal: Nepal to open banking sector to foreign playersNepal will allow foreign banks to operate branches in the Himalayan nation, opening up its financialsector to foreign players as part of its commitment to the WTO. Any foreign bank wanting to open its

branch in Nepal will be allowed to do so with a minimum capital of US$30 million from January 2010.Impoverished Nepal joined the World Trade Organisation in 2004 but is yet to open its telecom, financialand insurance sectors to foreign players. This is the beginning of the opening of its service sector toforeigners. It will raise the competition, bring technology and management skills to Nepal. So farforeigners were allowed to invest in Nepali joint venture banks. Nepal has more than two dozencommercial banks.

INVESTMENT

India: Union Bank of India raises authorised capital to Rs30bnUnion Bank of India has informed that in accordance with Section 3 (2-A) of the Banking Companies(Acquisition and Transfer of Undertakings) Act, 1970, Government of India on the recommendation ofReserve Bank of India has issued a Notification on November 10, 2009 increasing the authorised capital

of the nationalised banks from Rs15 billion to Rs30 billion. In this regard, the Bank has informed that theBank has raised its authorised capital to Rs30 billion from the existing Rs15 billion and resolution in thisrespect was passed in the Meeting of the Board of Directors of the Bank held on December 12, 2009.

MERGERS AND ACQUISITIONS

Asia-PacificAustralia: ANZ bank silent on AMP rumour, focused on ING dealAustralia and New Zealand Banking Group Ltd (ANZ.AX), the smallest of Australia's four big lenders,declined recently to comment on rumours that it might be interested in acquiring wealth manager AMPLtd (AMP.AX). The bank remained focused on bedding down its recent buy-out of a wealth managementjoint venture with Dutch financial group ING (ING.AS). ANZ's core business was banking and that it

remained interested in developing its wealth management business.


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India: Syndicate Bank eyes Bharti stake in AMCManipal-based Syndicate Bank is in talks to acquire Bhartis 25% stake in Bharti Axa InvestmentManagers (IM), as part of its plan to enter the asset management business. Since the Bharti Axa portfoliois heavily skewed towards debt, chances are Syndicate Bank may succeed in closing the transaction at a

comparatively lower valuation. Of the Rs6.51billion assets under management as on November 09, equityschemes comprise just about Rs1.17billion. Banks like Andhra and Dhanalakshmi had also evincedinterest in acquiring Bhartis stake in the mutual fund JV with French major Axa. The AMC beganoperations in July 09. Bharti Ventures holds 25% equity stake in the JV while Axa Investment Managers

Asia Holdings owns the balance 75%. Axa Investment Managers is a multi-expert investment managerbacked by the Axa Group. Axa IM manages both Axa Group and third-party assets. As on December 08,it was managing over 485 billion assets worldwide.

India: Kotak, Renaissance tie up for M&A advisory services in CIS, AfricaKotak Investment Banking recently announced an alliance with Renaissance Capital for cross-borderM&A advisory in CIS countries and Africa, the second such tie-up that the Indian investment bank hasforged as it looks to engage with a growing number of Indian corporates who are exploring options to

expand overseas.Last year, Kotak had tied up with GCA Savvian Corporation, an independent Japaneseinvestment bank. Renaissance Capital, a part of the Renaissance Group, is a leading investment bank inRussia, central Asia, Eastern Europe and Africa. With Indian corporates looking at the inorganic route togrow, local firms have a limited role as a bulk of the advisory gets done by global firms. According to

Thomson Reuters, cross-border deals in 2007 contributed to 71.9% of overall deals, in 2008 it was 60.2%and in 2009, it has been 37.2%. However, 2009 has been a bad year globally because of the financial crisis.Both players are trying to take advantage of the appetite shown by Indian companies who are scouting forbuy-outs in oil & gas and natural resources across the African region and CIS countries.

India: LS approves merger of State Bank of Saurashtra with SBIThe Lok Sabha recently post facto put its seal on merger of the State Bank of Saurashtra (SBS) with StateBank of India (SBI). The House approved the two bills to given effect to the merger that took place last

year.The bills to repeal the State Bank of Saurashtra Act and amend the SBI (Subsidiary Banks) Act werepassed by voice vote.The associate bank was merged with the SBI in October 2008 following resolutionspassed by the boards of both the banks.The amendments, though a legislative formality, was opposed byCPI-M and CPI which saw in the merger a larger design to privatise the state-owned banking sector.


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INDUSTRY STATISTICS

Credit & Deposit Scenario in India(Rs in bn)

Top 10 Cities Arranged According to Aggregate Deposits(Rs in bn)

2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 Aggregate Deposits 15044.2 17002 21090.49 26119.3 31969.4 38341.1Bank credit 8407.85 11004.3 15070.77 19311.9 23619.1 27755.5CD Ratio(RHS) 56 65 71 74 74 72Source: RBI; Cygnus Research

S.no Deposit CreditC/D

Ratio(%)

1 Mumbai 8184 7530 92

2 Delhi 5171 3262 63

3 Bangalore 1625 1267 78

4 Kolkata 1272 1043 82

5 Chennai 1157 1469 127

6 Hyderabad 849 1055 124

7 Pune 509 391 77

8 Ahmedabad 504 483 96

9 Lucknow 408 166 41

10 Chandighar 259 341 132Source: RBI; Cygnus Research

Credit & Deposit Scenario in India

5000

15000

25000

35000

2003-04 2004-05 2005-06 2006-07 2007-08 2008-09

Rsinbn

40

60

80

%

Aggregate Deposits

Bank credit

CD Ratio(RHS)

Source: RBI; Cygnus Research


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Credit & Deposit Scenario in Top Indian Cities

0

6000

12000

Mumbai

Delhi

Bngl'r

Kolkata

Chennai

Hyd

Pune

Ahmd

Lucknow

ChdgrR

sinbn

0

60

120

180

%

Deposit (LHS)

Credit (LHS)C/D ratio(%) (RHS)

Source: RBI, Cygnus Research


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SERVICE FOCUS

Mobile Banking

IntroductionMobile banking (also known as M-Banking, mbanking, SMS Banking etc.) is aterm used for performing balance checks, account transactions, payments etc.,

via a mobile device such as a mobile phone. Mobile banking today is mostoften performed via SMS or the Mobile Internet but can also use specialprograms called clients downloaded to the mobile device. Mobile Bankingrefers to provision and availment of banking and financial services with thehelp of mobile telecommunication devices. The scope of offered services may include facilities to conductbank and stock market transactions, to administer accounts and to access customised information.

Global Overview

Mobile banking has come in handy in many parts of the world with little or no infrastructuredevelopment, especially in remote and rural areas. This part of the mobile commerce is also very popularin countries where most of their population is unbanked. In most of these places banks can only be foundin big cities and customers have to travel hundreds of miles to the nearest bank. Countries like Sudan,Ghana and South Africa received this new commerce very well. In Latin America countries like Uruguay,Paraguay, Argentina, Brazil, Venezuela, Colombia, Guatemala and recently Mexico started with a hugesuccess. In Colombia it was released with Redeban. In Iran banks like Parsian, Tejarat, Mellat, Saderat,Sepah, edbi and bankmelli offer this service. Guatemala has the support of Banco industrial. Mexicoreleased the mobile commerce with Omnilife, Bancomer and a private company (MPower Ventures).Kenya's Safaricom (Part of the Vodafone Group) has had the very popular M-Pesa Service - mainly usedto transfer limited amounts of money, but has been increasingly used to pay utility bills. Zain in 2009launched their own mobile money transfer business known as ZAP in Kenya and other African countries.

Trends in Mobile bankingThe advent of the Internet has enabled new ways to conduct banking business, resulting in the creation ofnew institutions, such as online banks, online brokers and wealth managers. Such institutions still accountfor a tiny percentage of the industry. Over the last few years, the mobile and wireless market has been oneof the fastest growing markets in the world and it is still growing at a rapid pace. According to the GSM

Association and Ovum, the number of mobile subscribers exceeded 2 billion in September 2005, and nowexceeds 2.5 billion (of which more than 2 billion are GSM). With mobile technology, banks can offerservices to their customers such as doing funds transfer while travelling, receiving online updates of stockprice or even performing stock trading while being stuck in traffic. Smartphones and 3G connectivityprovide some capabilities that older text message-only phones do not.

According to a study by Financial ConsultancyCelent, 35% of online banking households will be usingmobile banking by 2010, up from less than 1% today. New functionalities will make mobile bankingdistinct from online banking and attract users. For instance,mobile banking will eventually allow users tomake payments at the physical point of sale. These mobile contactless payments will make up 10% ofthe contactless market by 2010. Many believe that mobile users have just started to fully utilise the datacapabilities in their mobile phones. In Asian countries like India, China, Bangladesh, Indonesia andPhilippines, where mobile infrastructure is comparatively better than the fixed-line infrastructure, and inEuropean countries, where mobile phone penetration is very high (at least 80% of consumers use amobile phone), mobile banking is likely to appeal even more.


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Mobile Banking Business Models

Bank-focused modelThe bank-focused model emerges when a traditional bank uses non-traditional low-cost delivery channels

to provide banking services to its existing customers. Examples range from use of Automatic TellerMachines (ATMs) to internet banking or mobile phone banking to provide certain limited bankingservices to banks customers. This model is additive in nature and may be seen as a modest extension ofconventional branch-based banking.

Bank-led modelThe bank-led model offers a distinct alternative to conventional branch-based banking in that customerconducts financial transactions at a whole range of retail agents (or through mobile phone) instead of atbank branches or through bank employees. This model promises the potential to substantially increasethe financial services outreach by using a different delivery channel (retailers/mobile phones), a differenttrade partner (telco/chain store) having experience and target market distinct from traditional banks, andmay be significantly cheaper than the bank-based alternatives. The bank-led model may be implemented

by either using correspondent arrangements or by creating a JV between Bank and Telco/non-bank. Inthis model customer account relationship rests with the bank.

Non-bank-led modelThe non-bank-led model is where a bank does not come into the picture (except possibly as a safe-keeperof surplus funds) and the non-bank (e.g. telco) performs all the functions.

Mobile Banking services

Account Information Mini-statements and checking of account history Alerts on account activity or passing of set thresholds Monitoring of term deposits Access to loan statements Access to card statements Mutual funds/equity statements Insurance policy management Pension plan management Status on cheque, stop payment on cheque Ordering check books Balance checking in the account Recent transactions Due date of payment (functionality for stop, change and deleting of payments) PIN provision, Change of PIN and reminder over the Internet Blocking of (lost, stolen) cardsPayments, Deposits, Withdrawals, and Transfers Domestic and international fund transfers Micro-payment handling Mobile recharging Commercial payment processing Bill payment processing Peer to Peer payments Withdrawal at banking agent Deposit at banking agent


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Especially for clients in remote locations, it will be important to helpthem deposit and withdraw funds at banking agents, i.e., retail andpostal outlets that turn cash into electronic funds and vice versa. Thefeasibility of such banking agents depends on local regulation which

enables retail outlets to take deposits or not.

A specific sequence of SMS messages will enable the system to verifyif the client has sufficient funds in his or her wallet and authorize adeposit or withdrawal transaction at the agent. When depositingmoney, the merchant receives cash and the system credits the client'sbank account or mobile wallet. In the same way, the client can also withdraw money at the merchant:through exchanging SMS to provide authorization, the merchant hands the client cash and debits themerchant's account.

Business and Service opportunities Alerts: SMS-Based alerts, for e.g. account credit or debit Marketing/Promos: SMS-based targeted marketing to bank customers after proper profiling onnew schemes, loans etc. Cross sell: Equities, mutual funds, insurance. Many banks already have necessary tie-

ups/subsidiaries in place News: Regarding a banks new Customer Services or Service Enhancements Education: Educating customers on banking and non banking (cross sell) products & concepts.

One of Indias top banks is already leveraging the print channel for similar campaigns Mobile Commerce: Tie up with retail chains, malls, movie chains through Mobile Aggregator

Portals for unparalleled convenience for basic consumer needs.

OutlookMobile banking is obviously the next step for the banking industry. According to the recent data released

by the Telecom Regulatory Authority of India (TRAI) the total number of mobile subscribers in Indiaincreased to 506.4 million at the end of November 09 from 488.4 million in October 09. Naturally, this isthe best technology channel for any company (especially in retail) to offer its products and servicesespecially Customer Servicesin this market. It offers unprecedented convenience and is certainlysomething that a Banks sales and marketing teams should think about deeply. Currently it has largelybeen introduced as yet another Customer Service line in addition to ATM, Call Centre and e-Banking.

The Central Government has been contemplating non-bank account based Mobile banking for ruralpenetration for Indias unbanked citizens. Banks planning to adopt Mobile Banking should go ahead andgive this vital Delivery Channel all the Management commitment needed and launch Mobile bankingservices for the Indian market.

ChallengesHandset operabilitySecurityScalability & ReliabilityApplication distributionPersonalization


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COMPANY SCAN

Corporation Bank

Nationalised in 1980, Corporation Bank was the forerunner when it cameto evolving and adapting to the financial sector reforms. In 1997, itbecame the Second Public Sector Bank in the country to enter capitalmarket, the IPO of which was over-subscribed by 13 times. The Bank hasmany "firsts" to its credit - Cash Management Services, Gold Banking, m-Commerce, "Online" approvals for Educational loans, 100% CBSCompliance and more recently, its pioneering efforts to take thetechnology to the rural masses in remotest villages through low-cost branchless banking - BusinessCorrespondent model. All of which symbolise Bank's unswerved commitment to its customers to provideconvenience banking.

Started about 103 years ago in 1906, with an initial capital of just Rs5000, Corporation Bank is all set tocross Rs. One Lakh Twenty five Crore mark in business and even far more, with over 2086 service outletsacross the nation, served by committed and dedicated 12,000 plus Corp bankers.

Companys Performance at a Glance (Rs in m)

2008-09 2007-08 2006-07 2005-06Operating Income 60673.51 45165.50 34301.60 26264.70Interest on Advance 43848.74 32212.90 23697.70 16490.50Income on Investment 15076.65 10782.20 8993.20 8534.80Other Incomes 11072.15 6997.80 5658.40 5714.60NPM 14.71 16.27 15.63 16.92Interest Expenditure 43763.75 30732.40 20523.70 13996.60

Operating Expenditure 10015.77 8919.50 8035.90 7467.50PAT 8927.70 7349.90 5361.40 4444.60Source: BSE India; Cygnus Research

KEY RATIOS2008-09 2007-08 2006-07 2005-06

Capital Adequacy Ratio 13.66 12.09 12.76 13.92Credit Deposit Ratio 67.77 70.7 71.66 70.72Cash Deposit Ratio 9.81 10.32 6.15 5.92Investment Deposit Ratio 34.79 33.32 31.63 32.03NIM (Net Interest Income/Total Funds) 3.03 3.12 3.48 3.83

Net Profit/Total Funds 1.04 1.01 0.90 1.00Return on Net Worth (%) 18.23 17.38 14.23 13.16Source: Company; Cygnus Research


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Performance Analysis

The Corporation Bank has shown a growth

of 34.34% on y-o-y basis in comparison tothe year 2008-09. The other incomes of thebank had increased by 58.22% toRs11072.15m in 2008-09 from Rs6997.80min 2007-08. PAT of increased by 21.47%to Rs8927.70m from Rs7349.90m.

The Bank has posted a net profit ofRs17695.47m for the quarter endedSeptember 30, 2009 as compared toRs14487.54m for the quarter endedSeptember 30, 2008.

Common Size ComparisonCorporation bank when compared withits peers Andhra Bank and AllahabadBank showed good operationalperformance - more or less equal to itspeers. In terms of operational expenses,the bank is spending more than itspeers as a percentage of operatingIncome. In terms of interest on balanceas a percentage of operating income,

Andhra Bank is performing at lowerlevel compared to its peers.Corporation Bank is paying high Taxthan Andhra Bank and less than

Allahabad as a percentage of operating income. The network and the client base of Corporation bank ismore than its peers.

Performance Analysis of Andhra Bank (Rs in m)Quarterly Performance Financial Year Performance

JAS09 JAS08 Var (%) 2008-09 2007-08 Var (%)Operating Income 17695.47 14487.54 22.14 60673.51 45165.50 34.34Other Income 3027.98 1743.71 73.65 11072.15 6997.80 58.22PBIT 18016.76 13935.90 29.28 61729.89 43243.80 42.75Interest Expenses 12660.31 10420.86 21.49 43763.75 30732.40 42.40PBT 5356.45 3515.04 52.39 17966.14 12511.40 43.60TAX 1500.00 1042.17 43.93 5179.82 3304.20 56.76PAT 2916.77 1915.11 52.30 8927.70 7349.90 21.47

Source: Company; Cygnus Research

Common Size Comparison for 2008-09

CorporationBank

AndhraBank

AllahabadBank

Operating Income 18.25 14.24 15.51

Other Income 16.51 20.55 19.00

Operating Expenses 1.40 0.70 0.15

Interest on Balance 29.61 23.97 25.81

PBT 8.54 4.56 4.17

Tax 14.71 12.15 10.44PAT 18.25 14.24 15.51

Source: Companies; Cygnus Research

Operat ing Income

17000

32000

47000

62000

20 08- 09 20 07- 0 8 2 00 6- 0 7 200 5- 0 6

Rsm

Source: BSE India; Cygnus Research


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Cost structureIn 2008-09, interest expenses as apercentage of operating incomesincrease were 72.13%. From the

above figures it can be concludedthat interest expenditure constitutesthe highest cost for the bank.Operating expenditure has decreasedby 16.51% in the year 2008-09 incomparison to the year 2007-08. Thetax charges of the bank have increased by 8.54% in the year 2008-09 in comparison to the previous year2007-08.

Stock Performance

The Sensex stood at 9647.31 points in the month of December 2008 and it went up to 16926.22 pointsindicating a growth of 75.45%. The sector indices grew by 84.11% over the period ranging fromDecember 2008 to November 2009. The sector indices reached 10042.46 points from 5454.54 points.

The company scrip traded at Rs188.75 and reached Rs447 in the month of November 2009 indicating agrowth of 136.82%.

OutlookThe Banks relatively small, regional and urban centric operations temper its growth outlook, on the keycompetitive parameters of CASA and Fee Income. Recognizing and acknowledging the highercompetitive pressures that the Bank faces because of its urban-focus, the management is explicitly

targeting branch expansion in smaller towns.Total business of the Bank is expected to be Rs1500 billionby March 2010. Deposits of the Bank and improvement in CASA share are expected to grow by 23% and30% respectively.

Cost Structure as Percentage of Operating Income2008-09 2007-08 2006-07 2005-06

Interest Expenses 72.13 68.04 59.83 53.29Operating Expenses 16.51 19.75 23.43 28.43Staff Expenses 7.71 9.47 11.03 13.84Other Expenses 8.79 10.28 12.40 14.59

Tax Charges 8.54 7.32 8.18 8.76Source: Companies; Cygnus Research

Relative Market Cap

Performance

80

110

140

170

200

230

Dec-08

Jan-09

Feb-09

Mar-09

Apr-09

May-09

Jun-09

Jul-09

Aug-09

Sep-09

Oct-09

Nov-09

Corporation bank

BSE Sensex

Bankex

Share Holding Pattern

Institu-

tions

38%

Pro-

moters

57%

Public

5%

Source: BSE India; Cygnus ResearchSource: BSE India; Cygnus Research


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STOCK SCAN

16 Nov-21 Nov 22 Nov-28 Nov 29 Nov-05 Dec 6 Dec -15 Dec

SENSEX

Indias stocks fellthe most in morethan two weeks onconcern a surge inforeign capitalinflows had madethe currency

stronger and cutexporterscompetitivenessduring this week.

Indian stock indicestumbled as investorsbooked profit inbanks, FMCG andreal estate stocks andthe expiry day forNovember

derivatives made thesensex end on anegative note duringthis week.

During this weekthe Sensex roseby 175 pointsdue to the hugebuying made inmetal and realtystocks. The in

flows of FDIalso showedsome positiveeffect on Sensex.

The Sensex witnessed a volatile week withimportantannouncements by thegovernment and globalcues. The goodperformance by the

telecom stocks and goodIIP numbers made theSensex to end on apositive note.

BSEBankex

The sector indicesfell down by 48.57points. It fell downfrom 10301.71 to10253.14.

The sector indicesfell down further by407.29 points. Theindices closed at9920.29.

The sectorindices went upby 202.17 points.

The indicesclosed at10244.63 pointsfrom 10042.46points.

The sector indices wentdown by 485.45 points.

The indices closed at9696.95 points from10182.40 points.

Relative Market Cap performance

85

90

95

100

105

16-Nov

17-Nov

18-Nov

19-Nov

20-Nov

21-Nov

22-Nov

23-Nov

24-Nov

25-Nov

26-Nov

27-Nov

28-Nov

29-Nov

30-Nov

1-Dec

2-Dec

3-Dec

4-Dec

5-Dec

6-Dec

7-Dec

8-Dec

9-Dec

10-Dec

11-Dec

12-Dec

13-Dec

14-Dec

15-Dec

BSESensex BSE Bankex SBI ICICI

Source: BSE India; Cygnus Research

Relative Market Cap performance

90

100

110

120

16-Nov

17-Nov

18-Nov

19-Nov

20-Nov

21-Nov

22-Nov

23-Nov

24-Nov

25-Nov

26-Nov

27-Nov

28-Nov

29-Nov

30-Nov

1-Dec

2-Dec

3-Dec

4-Dec

5-Dec

6-Dec

7-Dec

8-Dec

9-Dec

10-Dec

11-Dec

12-Dec

13-Dec

14-Dec

15-Dec

BSESensex

BSE Bankex

CANARA


16/18



SBI The stock felldown marginally by0.38%. The scrip

traded fell downfrom Rs2344.65 toRs2335.75, becausepowering the riseon optimism aboutthe economy.

The stock further felldown by 4.97%. Thescrip closed at

Rs2191.00 fromRs2305.60 because ofsanctioning loans butthere have been nopick-ups.

During this periodthe stock surgedpositively by

4.79%. Theclosing price ofthe stock stood atRs2204.20 due toSensex bouncedback.

The stock traded atlower price during the

week. It came down

to Rs2298.05indicating a negativegrowth of 0.88%.

ICICI The scrip showed anegative growth of5.67%. Thecompany stocktraded at Rs958.50and fell down to

Rs904.20, becausepowering the riseon optimism aboutthe economy.

The stock further wentdown by 11.35% fromRs890.70 to Rs789.60in this week becausetough marketconditions.

The stock wentup by 7.82%during this period.

The stock of thecompany traded atRs848.75 from

Rs787.20.

Again this week thecompany stock wentup by 2.32%. Thestock closed atRs909.40 fromRs888.80.

CANARA The stock declinedby 0.3%. It wastrading at Rs379.55and went down toRs378.40.

Consecutively in this week also, the stockfurther declined by6.01%. The stocktraded betweenRs363.00 and Rs341.20.

The stockbounced back by7.91%. The scripof the bank wentup to Rs355.95from Rs329.85.

After positive growththe bank stockfurther slipped by1.11% and closed at377.10.


17/18



UPCOMING EVENTS

1. Event Business India Money Show - Chandigarh

Date Feb 11-14, 2010Venue Parade Ground Chandigarh, Chandigarh, IndiaHighlights India's premier exhibition of finance, investment & small business products,

services, and technology. It will be the most comprehensive finance, investment& small business exhibition ever seen in India.

Contact Details Business India Exhibitions. 4/5, 1st Floor, Churchill Chambers, 32 BomanBehram Marg, Colaba, Mumbai, India.

Tel:+(91)-(22)-22882536; Fax:+(91)-(22)-228825402. Event Facility Management

Date Mar 09-11, 2010Venue Messe Frankfurt, Frankfurt, GermanyHighlights Facility Management is Germany's special-interest event focussed on facility

management which include both an exhibition and an international conferenceprogram supported by all leading associations. Professionals from the followingfields Project management, Operation models, Investment solutions, Real estateand major project financing, Leasing, Development plan, Land developmentplan, Planning of alternatives, Accommodation consultancy, Operational costsaccounting/optimisation, Preparation of budgets, Sanitary installations, Wastemanagement, Security services are targeted.

Contact Details Mesago Messe Frankfurt GmbHRotebuehlstr, 83-, Stuttgart, Germany.Tel:+(49)-(71)-1619460; Fax:+(49)-(71)-16194698

3. Event Caspian Banking & Finance Conference & ShowcaseDate Apr 06-07, 2010

Venue TBA, Baku, Azerbaijan

Highlights Caspian Banking & Finance Conference & Showcase is the Premier showcaseEvent for the Banking and Financial Industry with active participation of the

World Bank Group and International Monetary Fund.Contact Details Iteca Kavkasia Limited, Tbilisi Shanidze Street, 13/24, Tbilisi, Georgia.

Tel:+(995)-(32)-253780; Fax:+(995)-(32)-2508474. Event Banktech

Date May 25-27, 2010Venue Atakent International Exhibition Centre, Almaty, KazakhstanHighlights The annual Banktech international exhibition & conference, will be graced by

the major players in the nation's banking & financial sector who will unveil andremarket their products and interact with the general public to consolidate ontheir existing customer relations while creating a new customer base.

Contact Details ITE Group Plc105, Salusbury Road, London, United Kingdom.

Tel:+(44)-(207)-5965000; Fax:+(44)-(207)-759651115. Event Derby Property & Business Investment Show

Date Jun 02, 2010Venue The Roundhouse, Pride Park, Derby, England, United KingdomHighlights Derby Property & Business Investment Show is the new event for professional

service providers engaged in business finance, property & construction alongwith inward and indigenous investment.

Contact Details Business Shows GroupUnit 12, Hillfields, Derbyshire, United Kingdom.

Tel:+(44)-(775)-4664523


18/18



6. Event National Careers & Employment Expo-Gold CoastDate Jun 04-05, 2010

Venue Gold Coast Convention and Exhibition Centre, Queensland, AustraliaHighlights National Careers & Employment Expo provides the opportunity for students,

graduates, skilled and mature age workers, and those looking for a change tomeet face to face with Australia's leading organisations, government bodies,educational and training providers.

Contact Details EOC Group Pty LimitedLevel 2, 15-29 Bank Street, South Melbourne,Melbourne, Australia.

Tel:+(61)-(3)-86466203; Fax:+(61)-(3)-86466244

Banking and Financial Service-Industry Monitor-Jan 10

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Transcript of Banking and Financial Service-Industry Monitor-Jan 10