India's largest private-bank ICICI Bank (IBN -4.5%) reported FQ3 profit short of expectations after gross non-performing assets rose 35 basis points from a year ago to 3.4%. Net non-performing assets rose 18 bps from last quarter and 33 bps from a year ago to 1.27%.
The country's 2nd largest bank by assets, Bank of Baroda (OTC:BBKQY) fell 11% in Mumbai after Q3 profit slumped 68% to 3.34B rupees vs. analyst estimates of 12.5B.
The S&P BSE Bankex Index fell 3.1%, it's worst performance in a year, and the Sensex fell 1.7%.
The Sensex edged higher this week, bringing its 6-week move to a gain of 7%, and its YTD advance to 28%. The big gain this week came amid a rare visit from China's premier and the pledging of $20B in investments in India over the next five years.
Credit Suisse this week says India's banks - despite maybe being the most richly valued in Asia - have upside. They trade at 3x trailing book value, but that's inline with their 10-year average. What they have going for them now is improved governance, an accelerating economy, and interest rate hikes now in the rearview mirror. The team's favorite plays (trading in the States): ICICI Bank (IBN -1.8%), HDFC Bank (HDB -0.8%).
India's largest trade deficit with any single country is with China, and Chinese President Xi Jinping - visiting PM Modi in New Delhi - pledged to invest $20B over five years to help narrow the difference.
China is India's largest trade partner, with the two doing $68.5B of business last year, and India posting a trade shortfall of $34.4B. Xi's visit follows one from Japanese PM Shinzo Abe at which he pledged more than $30B in Indian infrastructure investments.
The Sensex gained 1.8% overnight. EPI +3.1%, PIN +2.5%.
ICICI Bank (IBN +3.1%), HDFC Bank (HDB +1.3%), Tata Motors (TTM +1.6%)
A volatile session in India saw the Sensex close up 0.9% to an all-time high following the election victory by the opposition Bharatiya Janata Party and its prime minster candidate Narendra Modi. Stocks initially rose more than 6% as results came in, but "sell the news" action took over, given the Sensex's already big run in the weeks leading up to the election.
In ETF action action in the States, EPI +4.6%, PIN +3.5%.
Banks: ICICI Bank (IBN +6.7%), HDFC Bank (HDB +3.3%).
Investors are placing bets ahead of next week's election results which are expected to show a win for the opposition party's Narendra Modi and the worst-ever defeat for the ruling Congress Party amid a wave of graft scandals, rising inflation, and slowing growth.
The Sensex - up 2.9% last night - is ahead by 17% since the opposition BJP party named Modi as its PM candidate last September.
Leading last night's advance was ICICI Bank (IBN +5.2% premarket). HDFC Bank (HDB +2.9% premarket)
The Reserve Bank of India approved the applications of infrastructure finance company IDFC and microlender Bandhan Financial Services to begin banking operations. The two were among 25 vying for licenses being offered for the first time in several years.
"RBI's approach in this round of bank licenses could well be categorized as conservative," says the central bank. "At a time when there is public concern about governance, and when it comes to licenses for entities that are intimately trusted by the Indian public, this may well be the most appropriate stance." The most recent census data in 2011 showed only 59% of Indian households had access to banking services.
A couple of current players: ICICI Bank (IBN +0.2%) and HDFC Bank (HDB +0.5%).
India had a relief rally on Wednesday after the RBi surprised by not hiking rates, but fell anew last night - dropping 0.7% for its 7th decline in 8 sessions.
Leading among the blue chips were the rate-sensitive stocks, with ICICI (IBN) Bank off 3% and HDFC (HDB) Bank down 2.1%.
"One of the big questions post Fed's move is whether liquidity will continue flowing to emerging markets like India or not. If rates go up in U.S. then it will be risk for EMs," says Aneesh Srivastava, CIO at IDBI Federal Life Insurance.
Indian banks get a lift after the central bank moves to roll back at least one emergency move taken to halt the sliding currency - cutting the marginal standing facility rate 50 basis points to 9%. The benchmark repurchase rate is held at 7.5%.
The rupee is up about 11% vs. the greenback after hitting a record low in late August, but weakened somewhat today.
ICICI Bank (IBN -3.9%) and HDFC Bank (HDB -4.4%) tumble after India's new central bank head unexpectedly hikes the benchmark rate to 7.5% from 7.25%, citing the need to bring inflation down. It's the first boost to rates in two years.
Amid that tightening in policy, however, the bank also eased other restrictive measures put in place over the summer to try and stem the rupee's decline (it's up 8% vs. the dollar in September).
For a second straight day, Indian stocks rise sharply — Sensex +2.2% — with banks leading the way, as new RBI governor Raghuram Rajan has apparently managed to instill some confidence in the market. (previous)
In addition to the creation of inflation indexed savings certificates and the issuance of long-awaited new banking licenses, Rajan will open FX swap lines between banks and the RBI (see diagram) a move BofA says may boost the country's flagging reserves by $10B.
"This is exactly what the market wanted to hear," one Mumbai-based banker says. Apparently so — shares of India's largest lender HDFC Bank (HDB +7.1%) rose 8% Thursday, fueling what Bloomberg says was the largest rally in the S&P BSE India Bankex index in four years.
The WisdomTree India Earnings Fund (EPI +1.8%), ICICI Bank (IBN +12.3%), The WisdomTree Indian Rupee Fund (ICN +0.3%).
Among the promised reforms from new RBI head Raghuram Rajan will be allowing banks to open new domestic branches without central bank permission and the issuance of long-awaited new banking licenses by January.
The RBI will also soon issue inflation-indexed savings certificates and take steps to encourage financial services for the poor.
He plans his first monetary policy address on September 20.
"Some of the actions I will take will not be popular ... The governorship of the central bank is not meant to win one votes of Facebook 'likes.'"
The WisdomTree India Earnings Fund (EPI +4.5%), ICICI Bank (IBN +3.2%), HDFC Bank (HDB +2.9%). The WisdomTree Indian Rupee Fund (ICN +2.6%).
The Sensex broke a 3-day winning streak, tumbling 3.5% as the rupee fell as much as 2% amid worries India is set to be downgraded. An S&P report says the chances of an Indian downgraded are higher than those for Indonesia.
Goldman cuts its fiscal year GDP growth forecast to 4% from 6%, and now expects the rupee to fall as low as 72 to the dollar in the next 6 months. It takes just more than 67 rupees to buy a greenback at the moment.