Sector loan growth has accelerated to 27.6% YoY as of 7 November, despite slowing economic growth. Though partly driven by higher oil company borrowing, industrial loan growth ex-oil also accelerated to 27.6% YoY (August 2008 data).
Growth in some potentially higher risk segments like real estate, construction, metals, finance companies and credit cards also remains high, and has actually accelerated.
Our recent conversation with banks indicates stress is emerging in exports, driven sectors such as textiles, auto ancillaries, gems & jewellery, commodity sectors, real estate and commercial vehicles.
Bank-wise data shows that BOB, BOI, PNB and SBI have relatively higher export-driven and metals exposure. IOB and Indian have relatively higher real estate/construction exposure, while Canara and Indian have high infrastructure exposure.
Among these stocks, Canara and IOB also have low coverage as well as low Tier I, which is a cause for concern.
In addition, Axis has large non-funded exposure to gems and jewellery segment (~11% of total credit exposure as of March 2008).
Indian Bank and IOB reported large NPLs in real estate portfolio in 2Q. With the recent restructuring guidelines mandating classification of restructured real estate loans as sub-standard, there is clearly a risk of a sharp up-tick in NPLs from this segment in the coming
quarters.
Canara and Indian have relatively high infrastructure exposure, while the SBI group’s exposure to infrastructure is a relatively low 6%, despite its dominating presence in the space. This gives an indication of its balance sheet size and diversity of asset base.
Monday, December 1, 2008
Indian Financial Sector Who's Got The Exposure?
Sector loan growth has accelerated to 27.6% YoY as of 7 November, despite slowing economic growth. Though partly driven by higher oil company borrowing, industrial loan growth ex-oil also accelerated to 27.6% YoY (August 2008 data).
Growth in some potentially higher risk segments like real estate, construction, metals, finance companies and credit cards also remains high, and has actually accelerated.
Our recent conversation with banks indicates stress is emerging in exports, driven sectors such as textiles, auto ancillaries, gems & jewellery, commodity sectors, real estate and commercial vehicles.
Bank-wise data shows that BOB, BOI, PNB and SBI have relatively higher export-driven and metals exposure. IOB and Indian have relatively higher real estate/construction exposure, while Canara and Indian have high infrastructure exposure.
Among these stocks, Canara and IOB also have low coverage as well as low Tier I, which is a cause for concern.
In addition, Axis has large non-funded exposure to gems and jewellery segment (~11% of total credit exposure as of March 2008).
Indian Bank and IOB reported large NPLs in real estate portfolio in 2Q. With the recent restructuring guidelines mandating classification of restructured real estate loans as sub-standard, there is clearly a risk of a sharp up-tick in NPLs from this segment in the coming
quarters.
Canara and Indian have relatively high infrastructure exposure, while the SBI group’s exposure to infrastructure is a relatively low 6%, despite its dominating presence in the space. This gives an indication of its balance sheet size and diversity of asset base.
Growth in some potentially higher risk segments like real estate, construction, metals, finance companies and credit cards also remains high, and has actually accelerated.
Our recent conversation with banks indicates stress is emerging in exports, driven sectors such as textiles, auto ancillaries, gems & jewellery, commodity sectors, real estate and commercial vehicles.
Bank-wise data shows that BOB, BOI, PNB and SBI have relatively higher export-driven and metals exposure. IOB and Indian have relatively higher real estate/construction exposure, while Canara and Indian have high infrastructure exposure.
Among these stocks, Canara and IOB also have low coverage as well as low Tier I, which is a cause for concern.
In addition, Axis has large non-funded exposure to gems and jewellery segment (~11% of total credit exposure as of March 2008).
Indian Bank and IOB reported large NPLs in real estate portfolio in 2Q. With the recent restructuring guidelines mandating classification of restructured real estate loans as sub-standard, there is clearly a risk of a sharp up-tick in NPLs from this segment in the coming
quarters.
Canara and Indian have relatively high infrastructure exposure, while the SBI group’s exposure to infrastructure is a relatively low 6%, despite its dominating presence in the space. This gives an indication of its balance sheet size and diversity of asset base.
Indian Financial Sector Who's Got The Exposure?
Sector loan growth has accelerated to 27.6% YoY as of 7 November, despite slowing economic growth. Though partly driven by higher oil company borrowing, industrial loan growth ex-oil also accelerated to 27.6% YoY (August 2008 data).
Growth in some potentially higher risk segments like real estate, construction, metals, finance companies and credit cards also remains high, and has actually accelerated.
Our recent conversation with banks indicates stress is emerging in exports, driven sectors such as textiles, auto ancillaries, gems & jewellery, commodity sectors, real estate and commercial vehicles.
Bank-wise data shows that BOB, BOI, PNB and SBI have relatively higher export-driven and metals exposure. IOB and Indian have relatively higher real estate/construction exposure, while Canara and Indian have high infrastructure exposure.
Among these stocks, Canara and IOB also have low coverage as well as low Tier I, which is a cause for concern.
In addition, Axis has large non-funded exposure to gems and jewellery segment (~11% of total credit exposure as of March 2008).
Indian Bank and IOB reported large NPLs in real estate portfolio in 2Q. With the recent restructuring guidelines mandating classification of restructured real estate loans as sub-standard, there is clearly a risk of a sharp up-tick in NPLs from this segment in the coming
quarters.
Canara and Indian have relatively high infrastructure exposure, while the SBI group’s exposure to infrastructure is a relatively low 6%, despite its dominating presence in the space. This gives an indication of its balance sheet size and diversity of asset base.
Growth in some potentially higher risk segments like real estate, construction, metals, finance companies and credit cards also remains high, and has actually accelerated.
Our recent conversation with banks indicates stress is emerging in exports, driven sectors such as textiles, auto ancillaries, gems & jewellery, commodity sectors, real estate and commercial vehicles.
Bank-wise data shows that BOB, BOI, PNB and SBI have relatively higher export-driven and metals exposure. IOB and Indian have relatively higher real estate/construction exposure, while Canara and Indian have high infrastructure exposure.
Among these stocks, Canara and IOB also have low coverage as well as low Tier I, which is a cause for concern.
In addition, Axis has large non-funded exposure to gems and jewellery segment (~11% of total credit exposure as of March 2008).
Indian Bank and IOB reported large NPLs in real estate portfolio in 2Q. With the recent restructuring guidelines mandating classification of restructured real estate loans as sub-standard, there is clearly a risk of a sharp up-tick in NPLs from this segment in the coming
quarters.
Canara and Indian have relatively high infrastructure exposure, while the SBI group’s exposure to infrastructure is a relatively low 6%, despite its dominating presence in the space. This gives an indication of its balance sheet size and diversity of asset base.
India’s 2QFY09 GDP grew at 7.6%
Indian economy grew at 7.6%oya in Q2 2008-09 (July-Sept) higher than the consensus expectation of 7.2%; (Q1 2008-09: 7.9%; Q2 2007-08: 9.3%). The 1HFY09 Real GDP growth stood at 7.8%yoy. Nominal GDP in 1HFY09 stood at 17.5% (price effect).
* The manufacturing sector, as expected from IIP numbers, grew at 5%oya while construction growth surprised on the upside growing at 9.7%oya resulting in a growth rate of industry at 6.1%oya. Services sector grew at 9.6%oya, declining less than manufacturing sector with trade and transport growing at 10.8% (11.2%oya in Q1 FY09) and financial services at 9.2% compared to 9.3% in Q1.
* Growth in private consumption declined in Q2 2008-09 over previous quarter (5%oya vs. 8%oya in Q1FY09) due to the negative impact of higher interest rate and very high inflation. It was the slowest growth since last 3 years. Growth in investments was surprisingly high at 13.8%oya compared to 9% in Q1 FY09.
Bottom Line: We believe that going forward GDP growth is likely to moderate in next two quarters. Manufacturing, construction, trade & transport sectors will decelerate in coming months. Given the ongoing decline in overall funding to the industry, the investment growth (GFCF) is likely to trend down to single digit levels in coming quarters. Lower inflation and declining interest rate may spur consumption. Government spending in next few months (it being an election year) will support growth. So we expect India to soft land with around 7% GDP growth in FY09 (compared to the 9% outcome in FY08).
* The manufacturing sector, as expected from IIP numbers, grew at 5%oya while construction growth surprised on the upside growing at 9.7%oya resulting in a growth rate of industry at 6.1%oya. Services sector grew at 9.6%oya, declining less than manufacturing sector with trade and transport growing at 10.8% (11.2%oya in Q1 FY09) and financial services at 9.2% compared to 9.3% in Q1.
* Growth in private consumption declined in Q2 2008-09 over previous quarter (5%oya vs. 8%oya in Q1FY09) due to the negative impact of higher interest rate and very high inflation. It was the slowest growth since last 3 years. Growth in investments was surprisingly high at 13.8%oya compared to 9% in Q1 FY09.
Bottom Line: We believe that going forward GDP growth is likely to moderate in next two quarters. Manufacturing, construction, trade & transport sectors will decelerate in coming months. Given the ongoing decline in overall funding to the industry, the investment growth (GFCF) is likely to trend down to single digit levels in coming quarters. Lower inflation and declining interest rate may spur consumption. Government spending in next few months (it being an election year) will support growth. So we expect India to soft land with around 7% GDP growth in FY09 (compared to the 9% outcome in FY08).
India’s 2QFY09 GDP grew at 7.6%
Indian economy grew at 7.6%oya in Q2 2008-09 (July-Sept) higher than the consensus expectation of 7.2%; (Q1 2008-09: 7.9%; Q2 2007-08: 9.3%). The 1HFY09 Real GDP growth stood at 7.8%yoy. Nominal GDP in 1HFY09 stood at 17.5% (price effect).
* The manufacturing sector, as expected from IIP numbers, grew at 5%oya while construction growth surprised on the upside growing at 9.7%oya resulting in a growth rate of industry at 6.1%oya. Services sector grew at 9.6%oya, declining less than manufacturing sector with trade and transport growing at 10.8% (11.2%oya in Q1 FY09) and financial services at 9.2% compared to 9.3% in Q1.
* Growth in private consumption declined in Q2 2008-09 over previous quarter (5%oya vs. 8%oya in Q1FY09) due to the negative impact of higher interest rate and very high inflation. It was the slowest growth since last 3 years. Growth in investments was surprisingly high at 13.8%oya compared to 9% in Q1 FY09.
Bottom Line: We believe that going forward GDP growth is likely to moderate in next two quarters. Manufacturing, construction, trade & transport sectors will decelerate in coming months. Given the ongoing decline in overall funding to the industry, the investment growth (GFCF) is likely to trend down to single digit levels in coming quarters. Lower inflation and declining interest rate may spur consumption. Government spending in next few months (it being an election year) will support growth. So we expect India to soft land with around 7% GDP growth in FY09 (compared to the 9% outcome in FY08).
* The manufacturing sector, as expected from IIP numbers, grew at 5%oya while construction growth surprised on the upside growing at 9.7%oya resulting in a growth rate of industry at 6.1%oya. Services sector grew at 9.6%oya, declining less than manufacturing sector with trade and transport growing at 10.8% (11.2%oya in Q1 FY09) and financial services at 9.2% compared to 9.3% in Q1.
* Growth in private consumption declined in Q2 2008-09 over previous quarter (5%oya vs. 8%oya in Q1FY09) due to the negative impact of higher interest rate and very high inflation. It was the slowest growth since last 3 years. Growth in investments was surprisingly high at 13.8%oya compared to 9% in Q1 FY09.
Bottom Line: We believe that going forward GDP growth is likely to moderate in next two quarters. Manufacturing, construction, trade & transport sectors will decelerate in coming months. Given the ongoing decline in overall funding to the industry, the investment growth (GFCF) is likely to trend down to single digit levels in coming quarters. Lower inflation and declining interest rate may spur consumption. Government spending in next few months (it being an election year) will support growth. So we expect India to soft land with around 7% GDP growth in FY09 (compared to the 9% outcome in FY08).
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