[www.niftyviews.com:24077] ICICI-Moody's Sees Strength

[Rajiv Handa]

Moody's Investors Service says that while the public sector bank, the State
Bank of India's (SBI), profitability metrics could face lingering pressure
as it spends the next 6-8 quarters rebuilding its balance-sheet buffers,
its private sector counterpart, ICICI Bank Limited has seen significant
improvement in its core operating profitability, allowing ICICI to absorb a
higher level of credit costs.

"SBI is also showing a stabilization of its underlying asset quality, and
we believe that recent developments provide further confirmation that it
has moved past the worst of its latest asset cycle," says Alka Anbarasu, a
Moody's Vice President and Senior Analyst.

Anbarasu explains that SBI's new impaired loan formation has slowed, and
Moody's sees this development as a sign that, barring new adverse shocks,
the bank's delinquencies in this cycle have peaked.

"By contrast, ICICI's asset quality has deteriorated over the last few
quarters, and the bank's corporate loans will remain under pressure,
because some of its corporate customers show weak debt servicing metrics,"
says Srikanth Vadlamani, a Moody's Vice President and Senior Credit Officer.

Vadlamani explains that ICICI exhibits a meaningful exposure to large
corporates, and that the exposure represents a key source of risk for the
bank's asset quality.

Moody's conclusions are contained in its just-released reports titled,
"State Bank of India: Pressure on Asset Quality Could Stabilize But
Rebuilding of Loss Buffers Will Weigh on Future Profits", and "ICICI Bank
Limited: Asset Quality Under Pressure, But Impact on Credit Profile Limited
by Strong Loss Buffers".

On the issue of loss-absorbing buffers, Moody's says that such buffers for
SBI are weak, and that SBI's profitability will remain under pressure, as
the bank seeks to rebuild its buffers.

In fact, a key weakness of SBI's credit profile is its thin loss-absorbing
buffers, making its profit metrics highly sensitive to the credit-loss
cycle. SBI reported a jump in credit costs to 2.2% of growth loans in the
third quarter ended 31 December 2015 for the current fiscal year ending 31
March 2016 (FYE 2016) compared to 1.5% in FYE 2015.

This situation consumed 81% of SBI's pre-provisioning income and reduced
its annualized return on assets to 0.21% from 0.68% over the same periods.

Nevertheless, Moody's expects that SBI's strong core earnings capacity — as
measured by operating/pre-provisioning profits as a percentage of total
assets — will limit downside risks for profitability, even if credit costs
were to increase.

By contrast, ICICI demonstrates significant buffers to withstand a
meaningful deterioration in its asset quality.

Moody's points out that ICICI has seen significant improvement in its core
operating profitability over the last few years, with its pre-provision
income (PPI)/average assets increasing to 3.18% for the fiscal year ended
31 March 2015 (FY2015) from 1.91% at FY2009. The increase in its core
profitability was driven by structural improvement in its funding profile,
as well as higher net interest margins and better cost-to-income ratios.

As a result, even if ICICI's non-performing loans increase sharply, the
bank can rebuild its loan loss reserve levels over a reasonable period of
time by providing for higher credit costs. Credit costs/PPI for the bank
for the nine months to 31 December 2015 registered 28%, indicating that the
bank has the capacity to support a much higher level of credit costs if
required.

On the issue of capital levels, Moody's says SBI's capital will broadly
remain stable, and access to internal and external capital sources is a key
strength. Moody's expects SBI to maintain its capitalization levels, such
that its common equity tier 1 (CET1) ratio will register around 9.0%-9.5%
for FYE 2017.

ICICI exhibits strong capital levels, with a CET 1 ratio of 12.7% at
end-2015. As demonstrated in the sale of its stake in its life insurance
subsidiary — completed in 2015 — ICICI can further support its capital
levels by selling down some stakes in its subsidiaries if needed.

As the largest bank in India by assets and deposits, SBI accounted for
around 17% of system loans and 16% of system deposits as of end-June 2015.
As of the same date, ICICI accounted for 6% of system loans and 4% of
system deposits.

Subscribers can access the reports below:

"State Bank of India: Pressure on Asset Quality Could Stabilize But
Rebuilding of Loss Buffers Will Weigh on Future Profits"

http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_1019207

"ICICI Bank Limited: Asset Quality Under Pressure, But Impact on Credit
Profile Limited by Strong Loss Buffers"

http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_1019206

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[www.niftyviews.com:24072] Fwd: EURUSD: Can A Hawkish FED Sent The EUR Towards Parity in 2016 ?

[Asis Ghosh]

 Forwarded Message 
Subject:EURUSD: Can A Hawkish FED Sent The EUR Towards Parity in 2016 ?
Date:   Wed, 16 Mar 2016 21:11:16 +0530
From:   Asis Ghosh 
Reply-To:   asis...@gmail.com



Looking at the chart. consecutive closing below 1.09-1.07 zone, EURUSD 
may fall towards 1.04-0.98 ( to fulfill Draghi's dream !!).


On the other side, only sustaining above 1.13, the pair can rally up to 
1.18-1.25 (although this is possible technically, but in reality, 
Draghi, the man behind the ECB's stance of "everything but the kitchen 
sink" will simply not allow it, because the whole QQE policy is designed 
for keeping EURUSD in the range of 1.15-1.05 or lower towards 
parity-1.00 to stimulate EU exports/economy).


*Trading Idea: EURUSD*

CMP: 1.1074

Either sell below 1.10 or on rise around 1.11042-1.1220

TGT1: 1.0825-1.0715-1.05235-1.04 (1-3M)

TGT2: 1.00-0.98 (6-12M)

TSL> 1.1375-1.15

*Note*: Consecutive closing (3 days) above 1.1375-1.15 zone for any 
reason, EURUSD may further rally up to 1.18-1.25 in the near to long term.


Today there is virtually no probability of FED rate hike and all 
attention will on the language of FED statement 
(hawkish/dovish/neutral), latest economic projection, Dot Plot forecast, 
forward guidance/Q by Yellen.


In order to justify the FED's Dec'15 rate hike, Yellen may take some 
hawkish stance amid improving job data, CPI but wage growth and consumer 
sentiment may deter the FED with ultra hawkish script.


FED may indicate that barring some "unforeseen" circumstances (like 
global/ China market turmoil in Jan-Feb), it may hike by 0.25% in 
June'16, just before the forthcoming US presidential election time.


Traditionally, FED will be in the hibernation mood in election time and 
after June, it may think of some action only in Dec'16, depending up on 
the next Govt's economic policy (Trump seems like more hawkish and 
Clinton on the dovish side). But, in reality, in US, such economic 
policy matter is highly dependent on FED/ US Senate/Cong and there may 
not be any big directional change, even if Trump wins.


FED basically may project only two hike (June/Dec'16) instead of four 
hikes in earlier dot plots, which may be seen as slightly hawkish (USD 
will gain strength for 1/2 hours/days and then come down).


On the other side, FED may choose not to experiment with the market 
before the election time as ultimately the last hike in Dec'15 (after 
nearly ten years) caused the global market turmoil in Jan-Feb'16 
(although triggered by slump in Oil and China jitters/Yuan devaluation). 
No Govt will like to face a presidential election with a market turmoil !!


Also, too much strong USD will not be good for US economy also and some 
other economic data may be pointing towards a "mini/luxury-recession" in 
US too !!


In the days ahead, apart from the above factors of Oil/Commodity and 
China, Brexit may be a real threat for FED to take a "wait & watch" 
stance rather than taking any real action (verbal intervention).


China/PBOC will also continue their mini/targeted stimulus frequently 
and this may also increase the probability of more Yuan devaluation 
apart from USD outflow fears and Chinese banks NPA/NPL/recapitalization 
issues.


On the other side, ECB/BOJ are ready with "anything" to stimulate their 
economy (QQE), but it seems that central bankers are increasingly "out 
of ideas" for more unconventional economic policy and ultimately some 
appropriate "structural reform" is required to stimulate the "real 
street" rather than the "buy back" rally in "Wall Street" on the back of 
"easy money".


Thus the divergent monetary policy between FED & ECB/BOJ/PBOC will make 
the USD stronger wrt to almost all the G-6 currency and consequently 
EURUSD may drift to near parity by the end of 2016 (1.07-1.04-0.98).


If  Oil is stabilized between $30-40, the present inverse correlation 
between EQ/Oil & safety of Yen may change and old inverse correlation of 
USD & EQ (i.e. strong USD may be bad for EQ in the days ahead after a 
temporary EQ rally).


*Analytical Charts:*














--
Thanks & Regards,

Asis Ghosh
(asisghosh.blogspot.com)
NCFM-TA Certified