Companies & Sectors
Dhanlaxmi Bank’s jittery financials are a concern

The sustained decline in profitability of the bank, coupled with the additional impact of further provisioning on its books is of grave concern for shareholders

Kerala-based Dhanlaxmi Bank is treading on choppy terrain these days, if its financials are anything to go by. The lender's bottom-line has been taking a hit for the past five quarters now, and faces some more heat given that it has yet to meet the mandatory provisioning requirement against its loan book.

The recent September quarter results have failed to provide much cheer to investors. Despite a healthy growth in the top-line, the bank's profits have been impacted due to staffing and branch expansions. The bank registered a 52% growth in revenues as advances have picked up considerably in this quarter. However, its net profit tanked a massive 74% to Rs1.62 crore from Rs6.26 crore in the corresponding quarter last year. Operating profit growth was muted at 9%, although entering positive territory after a long time.

Its performance over the past five quarters indicates that the bank finds itself in a sticky situation. Although average growth in revenues is fairly sound at 36%, the company's operating performance has averaged -39% over the past five quarters. On an average, net profits have declined 62% over this period.

The bank's net interest margin (NIM) has remained at around 2.4% over the past five quarters, which is much lower compared to some of its peers in the banking industry. On the asset performance side, the bank has gross non-performing assets (NPAs) at around 1.25% of its loan book while net NPAs stand at around 0.7%. However, the bank's loan-loss provisioning coverage at the end of September stood at only 46%. This is a long way from the mandatory provisioning requirement of 70% fixed by the Reserve Bank of India (RBI). This means that the bank will have to endure more stress on its profitability as it makes more provisioning in the coming quarters to address this deficit.

Recently, the bank announced the acquisition of 15% stake in financial services provider Destimoney Securities. This acquisition cost the bank around Rs13 crore. Destimoney Securities is a 100% subsidiary of Destimoney Enterprises, a financial services provider and advisory company owned and controlled by private equity firm New Silk Route.

According to bank officials, the primary reason behind this investment was to offer its retail customers access to online broking services through the bank. Although it could help the bank generate more current account, savings account (CASA) deposits, the investment is a costly affair at a time when the bank is experiencing more than just a pinch on its financial statement.

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COMMENTS

TARUNDAS

7 years ago

Yesterday a press meet was held at the 'trichur press club' in trichur where the so-called corporate office of the'dhan ' bank is situated .The media persons of the club were addressed by Mr.k.Ananthkumar,Vice President & a few other office bearers of the ''All India Bank Officers' Confederation'to inform about the precarious position of the bank.As one who attended these are the main allegations:
1) Though the financials of the bank are weak -the dividend for the investors has IMPROVED FROM 10 % TO 5 % ! --the new management makes investments to simply divert media attention while announcing POOR financial results - 15% stake in financial services provider Destimoney Securities.
2) The q2 results do not reflect the correct state of affairs of the bank as this little profit of Rs 1.62 crore has been made out of a total debit of Rs 8 crre from ALL SB ACCOUNTS UNDER THE HEAD "CHARGES" which is ultra vires.Hence this debit is reversed if a complaint is raised by a discerning customer .
HAD FULL PROVISION OF 70% MADE AS DIRECTED BY RBI , THE LOSS WOULD HAVE BEEN IN 3 DIGITS AS THE SHORTAGE IS 24 % !!!
3)Even when the financials are weak,they have taken 20000 sq ft ofspace on a prime location from where the top executives of this smallest bank in india with the lowest profitability though the corporate office is in Trichur (where the H.O. of 2 other bigger banks function ) .Further,to fool the public of Trichur they have started to construct a new corporate building( though a bigger bank with excellent profitability has only a 30000 sq ft H.O. !)Of ONE LAC SQ FT building !
4)Mr.Amitab ,the Md&ceo has , out of the total 39.50 lac ESOPS, 36.50 LAC SHARES OF WHICH 10.50 LAC SHARES TAKEN BY HIM ,26.0 LAC SHARES DISTRIBUTED AMONG HIS COHORTS WHO JOINED THE BANK SINCE 2008 ! THE LOYAL OFFICERS OF THE BANK TOGETHER GOT 3 LAC !!!!!

TARUN DAS

7 years ago

Yesterday a press meet was held at the 'trichur press club' in trichur where the so-called corporate office of the'dhan ' bank is situated .The media persons of the club were addressed by Mr.k.Ananthkumar,Vice President & a few other office bearers of the ''All India Bank Officers' Confederation'to inform about the precarious position of the bank and also the agitation they are sarting from 15/11/10 against the mismanagement .As one who attended ,these are the main allegations:
1) Though the financials of the bank are weak -the dividend for the investors has IMPROVED FROM 10 % TO 5 % ! --the new management makes investments to simply divert media attention while announcing POOR financial results - 15% stake in financial services provider Destimoney Securities.
2) The q2 results do not reflect the correct state of affairs of the bank as this little profit of Rs 1.62 crore has been made out of a total debit of Rs 8 crre from ALL SB ACCOUNTS UNDER THE HEAD "CHARGES" which is ultra vires.Hence this debit is reversed if a complaint is raised by a discerning customer .
3)Even when the financials are weak,they have taken 20000 sq ft ofspace on a prime location from where the top executives of this smallest bank in india with the lowest profitability though the corporate office is in Trichur (where the H.O. of 2 other bigger banks function ) .Further,to fool the public of Trichur they have started to construct a new corporate building( though a bigger bank with excellent profitability has only a 30000 sq ft H.O. !)Of ONE LAC SQ FT building !
4)Mr.Amitab ,the Md&ceo has , out of the total 39.50 lac ESOPS, 36.50 LAC SHARES OF WHICH 10.50 LAC SHARES TAKEN BY HIM ,26.0 LAC SHARES DISTRIBUTED AMONG HIS COHORTS WHO JOINED THE BANK SINCE 2008 ! THE LOYAL OFFICERS OF THE BANK TOGETHER GOT 3 LA !!!!!
5) onus denied to eligible offices.
6) HAD npa provision coverage provided FOR , THE LOSS WOULD HVE BEE PEHPS IN 3 DIGITS AS THE SHORTAG IS 24 % !!!

Sony Sajan

7 years ago

I completely agree with bank making losses.but look at the long term story.it is rite nw putting its operations n people rightly bcoz of which pat has taken a hit.the top line nos are awesum.opex going fwd will decline as bank is not planning further branch expansions and employee recruitment.Also we will have to review how good Dhanbank's strategy of getting in secured retail loans work out to be and what is its impact on NIM's.Acc to me its a wait n watch story.bank will show nos post FY11 or mid FY12

Steel prices to remain under pressure due to adverse weather conditions in Asia, says Goldman Sachs

Natural calamities that have occurred in Asia recently will create some pressure on prices till the end of December, according to the investment banker

Investment bank Goldman Sachs has said that it expects steel prices to remain under pressure till the end of this year due to adverse weather conditions in Asia, China's energy-conservation measures, rising inventories and lower capacity utilisation in the developed world, resulting in sluggish demand.
 
"Due to uncertain weather conditions, the Asian construction sector generally sees less activity in the period of July-September and so prices for the metal can go down. However, natural calamities have occurred late in the period, which will create some pressure on prices till the end of December," said Goldman Sachs in a report.
 
The Asian construction sector consumes about half of the region's steel production.
 
In south and south-east Asian countries, demand for steel from the construction sector has been largely affected due to natural calamities which occurred recently. There has been heavy flooding in many countries like China, India, Pakistan, Vietnam, Thailand and Indonesia, the report said.
 
Even countries like Korea, which have not been affected by natural disasters, are seeing a slowdown in construction activity, Goldman Sachs added.
 
According to the World Steel Association (WSA), crude steel production in China, the world's largest producer and consumer of the metal, fell 5.9% during September to 47.9 million metric tonnes (MMT) from the same month last year. The WSA said that Japan's crude steel output stood at 9.2MMT in September, up 11.7% compared to the same month last year, while South Korea's crude steel production increased 3.2% to 4.7MMT.
 
Energy-conservation measures in China have also forced steel producers to curb production. In addition, steel consumption in that country will be affected as the Chinese government has decided to limit multi-home ownership, said analysts. Construction accounts for half of the steel demand in China.
 
"Steel demand in China has come down due to a slowdown in the construction sector. The pace of growth has fallen but there is still some demand, so steel prices will not be affected adversely at least till December," said an analyst from Elara Securities (I) Pvt Ltd.

Asian steel consumption is running at an average utilisation rate of 86% against 69% for the US and 73% for Europe. Even capacity utilisation rate of Japanese steel majors like Nippon Steel Corp and JFE Steel Corp during July to September 2010 was 96% and 86% respectively, against 77% for US Steel and 71% for ArcelorMittal, the world's largest steelmaker. Higher utilisation rates in Asia are helping to offset some seasonal weaknesses, the report said.
 
"Steel demand in Europe and the US is recovering at a very slow pace which is putting pressure on prices. Lower capacity utilisation by European and US steel majors indicates muted demand in these countries. Europe particularly may remain weak due to the summer season and as the holiday season begins by December," an analyst from a Mumbai-based research firm said.
 
ArcelorMittal also painted a bleak picture for steel consumption during the October to December period, due to slowdown in demand in China, muted recovery in developed countries and rising raw material cost.
 
The steel major said it expected October-December EBITDA at $1.5 billion-$1.9 billion, against $2.26 billion in the July-September period, due to weak realisation.
 
"Our outlook for Q42010 remains cautious as the expected higher input prices continue to work through the business and demand remains muted, though with some regional differences," said LN Mittal, chairman and chief executive, ArcelorMittal, in a presentation to investors.
 
Goldman Sachs believes that lack of confidence among buyers may also put pressure on steel prices till December.
 
"Our channel checks with traders suggest that while demand in certain
segments/markets remains strong, there is a crisis of confidence leading to a buyers' strike," the investment bank said.
 
However, Goldman Sachs is optimistic about steel prices post December due to downward correction in inventories and rebound in construction activity, particularly in Asia.
 
"Furthermore, there is a belief that construction activity is only delayed, not cancelled. When the weather improves, one can expect demand to recover even stronger than usual due to all the pent-up demand for construction. If anything, Asian governments may have to spend on reconstruction activity after the bad weather," the report said.
 

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Personal finance Tuesday

HDFC Mutual Fund launches HDFC FMP 35D November 2010 (1); Birla Sun Life MF unveils Birla Sun Life Short Term FMP-Series 2; BNP Paribas MF launches BNP Paribas Fixed Term Fund-Series 19 B; ICICI Pru MF unveils ICICI Pru Fixed Maturity Plan-Series 53-1 Year Plan B; HDFC Mutual Fund floats HDFC FMP 100D November 2010 (1)

HDFC Mutual Fund launches HDFC FMP 35D November 2010 (1)

HDFC Mutual Fund has launched HDFC FMP 35D November 2010 (1), a close-ended income scheme.

The investment objective of the plan is to generate income through investments in debt/money-market instruments and government securities maturing on or before the maturity date of the respective plan. The scheme will invest 100% of the assets in debt securities and money-market instruments having low to medium risk profile.

The tenor of the plan is 35 days from the date of allotment. The plan offers growth and dividend options. The exit load for the plan is nil. During the new fund offer (NFO), the units will be offered at face value of Rs10 per unit. The NFO opens on 9th November and closes on 11th November. The minimum investment amount is Rs5,000. The minimum target amount is Rs1 crore.CRISIL Liquid Fund Index is the benchmark index. Bharat Pareek and Miten Lathia are the fund managers.

Birla Sun Life MF unveils Birla Sun Life Short Term FMP-Series 2

Birla Sun Life Mutual Fund has launched Birla Sun Life Short Term FMP-Series 2, a close-ended income scheme.

The scheme seeks to generate income by investing in fixed-income securities maturing on or before the duration of the scheme. The scheme will have duration of 90 days from the date of allotment. The scheme will invest 100% of the assets in debt securities and money-market instruments having low to medium risk profile.

The scheme offers growth and dividend (payout) option. During the new fund offer (NFO), the units will be offered at face value of Rs10 per unit. The NFO opens on 9th November and closes on the same day. The exit load for the scheme is nil. The minimum investment amount is Rs5,000. The minimum target amount is Rs10 crore.CRISIL Short Term Bond Fund Index is the benchmark index. The scheme is managed by Kaustubh Gupta.

BNP Paribas MF launches BNP Paribas Fixed Term Fund-Series 19 B

BNP Paribas Mutual Fund has launched BNP Paribas Fixed Term Fund-Series 19 B, a close-ended income scheme.

The investment objective of the scheme would be to achieve growth of capital through investments made in fixed-income securities maturing on or before the maturity of the scheme. The scheme would invest 100% of its assets in debt and money-market instruments having low to medium risk profile. Maturity date of the scheme would be 370 days from the date of allotment of units. The scheme offers growth and dividend (payout) option. During the new fund offer (NFO), the units will be offered at face value of Rs10 per unit. The NFO closes on 15th November. The exit load on the scheme is nil. The minimum investment amount is Rs5,000.CRISIL Short Term Bond Fund Index is the benchmark index. Alok Singh is the fund manager.

ICICI Pru MF unveils ICICI Pru Fixed Maturity Plan-Series 53-1 Year Plan B

ICICI Prudential Mutual Fund has unveiled ICICI Prudential Fixed Maturity Plan-Series 53-1 Year Plan B, a close-ended income scheme.

The investment objective of the plan is to seek to generate regular returns by investing in fixed-income securities/debt instruments which mature on or before the date of maturity of the plan. The tenure of the plan is 371 days.

The plan offers growth and dividend (payout) option. During the new fund offer (NFO), the units will be offered at face value of Rs10 per unit. The NFO opens on 9th November and closes on 12th November. Since the plan will be listed on the stock exchange, load will not be applicable.The minimum investment amount is Rs5,000.CRISIL Composite Bond Fund Index is the benchmark index. Chaitanya Pande is the fund manager.

HDFC Mutual Fund floats HDFC FMP 100D November 2010 (1)

HDFC Mutual Fund has launched HDFC FMP 100D November 2010 (1), close-ended income scheme. The investment objective of the plan under the scheme is to generate income through investments in debt /money-market instruments and government securities maturing on or before the maturity date of the plan.

The tenor of the scheme is 100 days from the date of allotment. During the new fund offer, the units will be offered at face value of Rs10 per unit. The new issue opens on 9th November and closes on 11th November.

The scheme offers growth and dividend options. The minimum investment amount is Rs5,000.CRISIL Liquid Fund Index is the benchmark index. Bharat Pareek and Miten Lathia are the fund manager.

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