20 Indian banks in top 500 global banking list
NEW DELHI: They may not be bankers to the world yet, but Indian banks have clearly set their eyes on that. In a year that saw the worst recession
for the global banking industry with several big daddies collapsing, resilient Indian banks have improved their brand value rapidly. There are 20 Indian banks in the Brand Finance® Global Banking 500, an annual international ranking by UK-based Brand Finance Plc, this year.
The State Bank of India (SBI) became the first Indian bank to break into the world’s Top 50 list, according to the Brand Finance study that saw HSBC retain its top slot for the third year in a row.
The study, released on Sunday and made exclusively available to ET in India, used discounted cash flow methodology to arrive at a net present value (NPV) of the trademark and associated intellectual property: the brand value. SBI’s brand value more than tripled to $4,551 million, up from $1,448 million in 2009 helping it grab the 36th spot in the list. ICICI Bank, the country’s largest private bank, joined it in the Top 100 list with a 130% jump in its brand value at $2,164 million.
Other big gainers in brand value include IDBI Bank (190%), Bank of Baroda (162%) and Union Bank of India (148%). The cumulative brand value of 20 Indian banks stood at $13,053 million. The 15 Indian banks that figured in last year’s list saw a whopping 130% rise in their combined brand value.
The number of Indian banks in the global list had more than tripled last year to 19 from six in 2007. Differentiation through strong brand and customer base value is becoming a key economic lever for Indian banks. This is as true in financial services as in consumer products.
“Indian banks need to recognise their inherent brand value potential and SBI’s remarkable performance by breaking into the top 50 financial services brands offers a lesson for others,” said Unni Krishnan, MD of Brand Finance India. SBI seems to be fast transforming into a brand-led business, with a broader, more holistic and sophisticated approach to managing the brand and stakeholder relationships.
“Brands act as a common glue that binds all the business functions, especially in financial services firms, resulting in greater coherence of strategy, service excellence and sustained business performance,” said Unni Krishnan, MD of Brand Finance India.
Asian aura shows Over all, HSBC remained the biggest bank brand for the third year in a row with its brand value rising 12% to $28,472 million. This must have been a relief to the bank that saw its brand value erode by 28% in 2009 league table.
The study notes that global banking sector has begun to show tangible signs of recovery, with the world’s 500 most valuable banking groups growing by 62% in terms of market capitalisation and their brand values cumulatively increasing by 49%.
“This year’s BrandFinance® Global Banking 500 shows how significant the recovery of global banking brands has been,” said David Haigh, CEO of Brand Finance plc. The total brand value of the Top 500 banks stands at $716 billion, up 49% over 2009 and 4% higher than in 2008, prior to the crisis.
“There has been a significant shift in the balance of power globally away from the US and towards banks in emerging markets,” said Mr Haigh.
The Asia region contributed 17% to the total global brand value, logging 31% growth in 2010. However, the number of Asian banks in the global 500 has dropped to 102 in 2010 from 120 the previous year.
Almost all banks in the Asian Top 10 have increased in brand value. However, this rise is not as strong as witnessed in more developed regions like Europe and North America, as they recover from the crisis.
Although the number of banks reported in the Top 500 from Asia has decreased, many banks in the region tend to be well capitalised and in countries such as India, banks have become far more competitive.
As such, the normalisation of markets has not had such a relatively profound increase in brand value in the Asian region. As was the case last year, the Asian Top 10 is dominated by Chinese banks with the gap between the major Chinese banks and the rest widening.
The biggest movement in the league table was made by SBI, which has seen its brand value more than triple to sixth biggest bank brand in Asia.
Another notable entrant is Standard Chartered, which has stepped up its Asian presence in recent years, saw a robust 59% growth in its brand value.
While the brand value increased, market capitalisation of the top 500 came down by 20% since 2008.
The US dominance of global banking has declined further with a decrease in the number in the global 500 down to 85 from 95 in 2009. The number of European banks in the list increased from 170 to 197, while that from the UK decreased from 24 to 22.
This suggests that the recovery on the European continent in particular France, Spain, and Switzerland has left British banks standing. The league table also notes that bank brands in emerging markets are slowly closing the gap. The top 20 bank brands in 2010, originate from nine countries, one more than 2009. It is for the first time that a Russian bank has made the top 20 (Sberbank) which has seen significant growth.
The Middle East has seen a 117% growth in brand value, based on high demand for Islamic banking products and services. On the other hand, Central America has seen a 40% decline in brand value. European bank brands have recovered significantly compared to the North American and Asian markets (78%, 30% and 26% growth, respectively).
Banks in the Pacific, including Australia and New Zealand have seen a recovery with growth of 58%.
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Subex, provider of fraud management and revenue assurance solutions to global telecom players, was one of the worst hit companies due to a slump in the telecom sector in the last eight quarters globally.
The company struggled to remain afloat as its clients from the telecom sector postponed investments in new projects. Now, the worst seems to be over for the sector. Telcos are showing signs of revival, which means that the investments could get back in the sector. This augurs well for Subex.
BUSINESS:
Subex earned Rs 600 crore in the last fiscal from product licences and managed services. Though products contribute over 90% of the revenue, the company is keen on improving the share of the services component as this offers higher margins in the long term. Subex offers solutions to more than half of the top 70 telcos in the world. Apart from its biggest market in the US, it has 54 clients in the African continent and six in India. It has 1,200 employees on its payroll. Its clientlist includes Bell, Comcast, T Mobile, Telefonica, Verizon, BT, Zain, Vodafone, BSNL, Reliance Communications, and Telstra among others.
Inorganic growth has played an important part in Subexs growth strategy. In the last five years it has acquired four companies in the field of revenue assurance, fraud management, and services fulfillment.
FINANCIALS:
Between FY04 and FY07, the company grew its topline four times aided by acquisitions. Its net profit shot up by a similar magnitude during the said period. However, the next two years proved to be challenging given the slowdown in the global telecom sector. Though topline continued to grow, profits were hard to come by. The company reported losses at the operating level in FY08 and FY09 since costs escalated at a faster pace than the revenues.
The December 09 quarter reflects signs of revival as the company returned to profitability. It has also restructured foreign currency loans that are convertible into equity shares. This has reduced its debt burden by around 24%.
STOCK VALUATIONS:
Subexs trailing twelve month (TTM) P/E (price-earnings ratio) cannot be considered since the company had posted losses during the first half of FY10. Assuming stable earnings per share for each of the quarters in FY11, its forward P/E comes out to be 6.7 at the current market price of Rs 66 per share. This makes it reasonably valued among the other mid-tier IT players which command P/Es of eight-to-ten . The book value is at Rs.97 which makes this a value stock to buy.
GROWTH PROSPECTS:
Subexs 07 acquisition of services fulfillment player Syndesis went awry as global telcos cut new capex postsubprime crisis. Subex took a big hit because of this since it was betting on selling the next generation deliverables of Syndesis. Given the recovery in the telecom space currently, Subex is hopeful of reviving the Syndesis business. The company is also aggressively expanding its services portfolio, which would generate recurring revenue. With the restructuring of its FCCBs and other debts, its interest costs will fall. This will support its net margin in the future quarters. Investors can consider to buy stocks on a long-term basis.
Source:ET Investors Guide
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ITC is one of the most diversified companies and it is a classic defensive stock to buy which investors should be investing in.
Reason behind recommending ITC as large cap safe stock to buy is the company's dominant business of cigarettes. Over the years it has diversified into non-tobacco businesses such as, FMCG, hotels, paper & paperboards and agri-products . ITC offers investors an interesting contra opportunity. True to its defensive nature, the companys stock has been under performing the markets since February last year. However, this should not disappoint the investors, as investment in the companys stock remains protected irrespective of where the market is headed.
SEGMENT-WISE ERFORMANCE & PROSPECTS:
The companys cigarette business, its most important segment, is fraught by increasing taxes and prohibitory regulations. The company, on realising the limited growth prospects of thisbusiness, has followed the strategy of de-risking its business model.
ITCs cigarette business, which contributes around 45% to the companys topline and 85% to its bottomline, has been growing at about 9-10 % y-o-y . It is witnessing healthy volume growth despite an increase in VAT in few states, imposition of a ban on smoking and a presence of low-priced tax-evading illegal cigarettes. The companys FMCGbusiness, although still loss making, has been witnessing steady increase in volumes. Strong performance in packaged foods and personal care products has been the major growth driver. Price hikes, changes in the product mix to include high margin products, portfolio extension and cost control measures (especially in retailing) have facilitated growth. The company intends to reduce losses of the division by 20% in the coming fiscal.
ITCs hotel business, which suffered the most during recession, has started showing signs of improvement. With occupancy rates inching up to nearly 60% and average room rates rising 15-20 %, revenues from this segment have started showing sequential improvement. The Commonwealth Games this year and Cricket World Cup in 2011 are likely to augur well for the hotel segment.
In its paper business, ITC commands a premium in all its products of paper, paperboards and packaging materials. The company has been making increasedinvestments in this division. Doubling pulp capacity, increased capacity utilisation and valueadded product-mix has enabled the company to be cost competitive and consolidate its market standing. The companys agri-business provides good sourcing support to the cigarette segment and has been witnessing a steady improvement in earnings. Strong performance of leaf tobacco products has enabled this segment to register strong growth this fiscal.
FINANCIALS:
The company's net sales have grown at a compounded annual growth rate (CAGR) of 19% over the last five fiscal years to reach close to Rs 16,500 crore in FY09. The net profits have grown at a CAGR of 16% during the same period to Rs 3,300 crore at the end of FY09. At a 3-year average payout ratio of 45%, the companys dividends have grown at 23%, much higher than the CAGR at which companys net profits grew.
STOCK VALUATIONS:
The company's stock is currently trading at a priceto-earnings ratio of 25. But its market cap is at a little over six times its net sales much higher than that of any other FMCG company. It comes on the back of promising growth prospects of the company in diversified segments. As the company continues to achieve strong growth in non-cigarette businesses, it will reduce its dependence on the tobacco business for growth. While this transition seems to be happening at a slow pace, long-term investors are likely to benefit from the companys promising growth story.
Source:ETIG
Checkout: Stocks To Buy In 2010
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Stock analysis based on Bharti Airtel's December '09 quarter results by Centrum Broking, a stock trading broker. Analysis suggest good upside in an years time.
Reco buy price: Rs 321
CMP: Rs 306.50
Target price: Rs 400
Upside: 30.5%
Bharti’s December 2009 quarter performance remained flat due to sequential fall in RPM (revenues per minute) by 7.8 per cent to 52 paisa. However, mobile minutes registered growth of 6.7 per cent to Rs 15,300 crore on the back of elasticity from lower tariffs and lower base in September 2009 quarter. Revenue declined 0.7 per cent sequentially and grew 1.4 per cent year-on-year to Rs 9,770 crore.
Increase in network costs and selling, general and administration costs depressed margins. EBITDA fell 6 per cent sequentially to Rs 3,900 crore and margins contracted 204 basis points to 40 per cent. The brokerage expects revenue performance to remain subdued in the March 2010 quarter, as RPM has not yet bottomed despite competition.
Market Cap 116,604.40
* EPS (TTM) 24.68
* P/E 12.44
* P/C 9.27
* Book Value 72.49
* Price/Book 4.24
Div(%) 20.00
Div Yield(%) 0.33
Market Lot 1.00
Face Value 5.00
Industry P/E 13.21
At Rs 321, the stock trades at 12.1 times its estimated 2010-11 EPS.
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