Thursday, February 7, 2013

Lost in LONDON

The results of UK’s General Elections were a forgone conclusion, but this long drawn out impasse might throw some strange bedfellows, reports James Landale from London

In 1974, Ted Heath famously asked the question, “Who governs Britain?” It is not a bad question to ask the day after the 2010 general election.

The first decision has come from Gordon Brown. Despite losing seats, despite coming second, he has chosen not to resign. He has instead paved the way for cross-party negotiations to begin by allowing civil servants to “support” the Conservatives and Liberal Democrats in any talks they may have.

If Brown had resigned, Cameron would have gone directly to Buckingham Palace and a minority government would have been formed.

The prime minister’s aides and ministers are making it very clear that they believe some kind of deal with the Liberal Democrats is possible, a kind of anti-Tory “progressive alliance” with an agreement on electoral reform at its heart.

The ball thus moves to Nick Clegg’s side of the court. He says he will stick by his campaign promise to allow the party with the most seats and votes – thus the Conservatives – to have the first right to seek to government.

He says, “It is now for the Conservative Party to prove that it is capable of seeking to govern in the national interest.” In other words, what are you offering, David Cameron? Clegg is not saying that he will never talk to Labour or do a deal with them, just that he will talk to the Tories first. He will listen to what Cameron offers him and take it to his party tomorrow. He will not move fast.

The Liberal Democrats will not want to do much with the Tories unless proportional representation is on the table. Remember that Clegg will have to take his party with him; he cannot operate alone in these talks.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles.
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Wednesday, February 6, 2013

INDIAN RETAIL BANKING: NEW ENTRANTS

After many years of waiting, Pranab Mukherjee says RBI will issue licences to new banks. Is the RBI on the same ground as Pranab Mukherjee? Evidently not!

Ever since the banking sector was opened up in 1993, the regulator has given out just 12 licenses (of which 10 were given in the first year, while two were given in 2002 to Kotak Mahindra Bank and YES Bank). Therefore, this announcement comes as a good tiding to many public, private players and NBFCs (of the likes of Shriram Capital, Sahara, Reliance Capital, the Aditya Birla Nuvo group, Bajaj Auto group, L&T Finance, Tata Capital, Indiabulls, Religare, Exim Bank, IFCI and SIDBI), who have for long, worked on blueprints to make a name in the Indian retail banking arena. To represent the joys at the bourses in numbers, at the end of the Union Budget day, the Religare stock (an NBFC) had inched up by 3%, Aditya Birla Nuvo gained 4%, Reliance Capital grew by 8.1% while Bajaj Auto Finance surged 5.3%. Expressing his intentions in this regard, Sunil Godhwani, CEO & MD, Religare Enterprise, says, “Banking is a natural progression for any integrated financial services player...” As a company official says, “Religare is currently waiting for a banking licence, and at present, talks are on with the ministry.”

The entry of these new players in a sector which at present has 96 scheduled commercial banks [27 public sector banks (which hold over 75% of the total assets of the banking industry), 31 private banks and 38 foreign banks], with a combined network of over 53,000 branches, will not only increase competition and dilute PSU involvement, but will force some change in the functioning of the banking domain as a whole. But despite hopes that these new banking aspirants will increase penetration of banking services in the country (only 6.4% of the branches of new private banks are in rural areas), the question is: are they prepared yet?

Under the current guidelines, a new private sector bank should have a minimum net worth of Rs.3 billion, and no single entity or group of related entities can hold more than 10% in a bank. There is a distinct possibility that RBI may increase the minimum net worth limit to at least Rs.5 billion, but many participants are confident of making the cut; one of whom is Ajay Srinivasan, CEO, Birla Financial Services, who says, “We welcome this initiative and will definitely apply for a licence. We are confident of meeting any eligibility criteria that might be set.” While talking about the change in the eligibility criteria for these new entrants, Usha Thorat, Deputy Governor of RBI says, “We have to work on it. It’s a long process and will take some time.”


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles.
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Tuesday, February 5, 2013

CITIBANK: VIKRAM PANDIT

More so when it wears the Citi crown! Is Vikram Pandit drowning in a vicious cycle? by Deepak Ranjan Patra

Pandit has made some progress to help Citi avoid slipping into oblivion last year by slashing a great chunk of its non-core assets and businesses. Moreover, Pandit has also managed to cut Citi’s payroll bills by almost 20% to $25 billion, by downsizing employee strength from a high of 375,000 to 265,000 globally. But then, it’s a competitive and comparative world. So when Vikram Pandit says, “We have made enormous progress in 2009... We greatly improved Citi’s capital strength, reduced the size and scope of the company, and refocused our business strategy to take advantage of our unmatched global network,” in a press statement, it raises a lot of eyebrows. From a loss of over $27 billion in FY2008 to just $1.6 billion is surely an enormous progress for Pandit, but it’s prone to questioning from the rational observer for two basic reasons. First, Citi’s peers are at a healthy profit; and second, Pandit’s excuse for the loss, $6.2 billion in debt repayment, is just a small part of $50 billion that the bank has taken from the government. Investors are concerned that the bank, wishing to return to the top of the tables, is still a clear laggard.

With the heat rising against him, Pandit has now decided to play new cards; by reshuffling the top honchos. Some of the moves are clearly well thought of. The most critical of the list is the replacement of Terri Dial, Chief Executive of Consumer Banking for the Americas by Manuel Medina-Mora, head of Citigroup’s Latin American businesses. The move, as believed at the Citi headquarter, is expected to bring in an overhaul in the retail banking business. But Pandit hired Dial amidst similar sentiments among his first major hires after joining Citi. Also, Medina-Mora has absolutely no banking experience in the hyper competitive North American retail market. Is this just a plain shot in the dark?

However, Pandit has received a little cushion from rating agencies like S&P, who left Citi’s ratings unchanged despite the weak Q4 results. The agency finds Citi’s financial performance stabilising. Scott Sprinzen, Primary Credit Analyst, S&P tells B&E, “Citi has completed a number of major actions during the past 18 months to offset the impact of net losses on its equity base, increase its total capital, and bolster the quality of its capital.” Also net additions to the loan-loss reserve ($802 million) were the lowest in several quarters and total allowance for loan losses stands at a satisfactory level of 5.9% of total loans. Adds Tanya Azarchs, Secondary Credit Analyst, S&P, “Cost-cutting efforts continue to yield results.” (Citi refused to comment).


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles.

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