A sea change

The global credit markets are no longer a quest for safe haven nor are they any longer carrying any lesser risk premium than the equity markets. While global correlation stepped up in the last few months in equities, it has increeeasingly become tied at the bone to moves in the fixed income markets with terms like sovereign risk or spreads between sovereign and corporate risk making a good hot fudge and no business.

Opportunity for Indian Bankers

Indian Private sector banks have long struggled in the international arena but despite foreign competition in structured finance and leverage products and a norma regulator-local bank close relationship in USA and Europe have ventured out and established foreign branches in 5 continents. While the earlier propensity for choosing non resident indian customers for credit and deposit products , the current opportunities in Transaction banking globally and their comfortable liquidity position are the right fits for a global custom. While they will have to start out by buying foreign credit portfolios as customers are equally choosy in these uncertain conditions and the banks must choose quality credit.

The quantitative leverage in terms of Tier I Capital of 11.5% and Capital raitios of 18-20% for ICICI Bank and HDFC Bank would be wasted on Indian credit as quality borrowers are not available in the local market and public sector bnanks already carry nearly 66% of the share of business, ICICI Banka nd HDFC Bank contributing to a 30% share of Indian credit with Axis Bank

Though a much more detailed analysis is planned, this much is beyond doubt and not much in terms of options is available to Indian players, India's tiered international access in banking and insurance having long created untenable costs in their being branded as risk averse and or market unfriendly in inter bank markets unnecessarily

 

THIS IS A PRELIMINARY DRAFT

The bitter pill for Indian Private Banks

India's Forexonomics ensure that india's capital and outward ambitions automatically make its best large cap efforts look like mid market plays for the global audience. A bitter pill to swallow but one India and I myself among others of mine and the next two generations have long resisted. The behemoth of an ICICI Bank or that of HDFC Bank, being from Asia have long been identified as new players in the global arena and because of risk parameters self defined, they are yet to use their international businesses to extend credit to international companies, not that many quality businesses would approach them for syndication either. 

Having all the research time I need at my disposal though

Posted via email from The India Investment Post