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xbox
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   Topic: NBFC - New Kid on the Block
Posted: 03/Dec/2007 at 6:59am |
Bank is lifeline of any economy. NBFC (Non-Banking Financial Companies) are getting it's presence felt in same segment of the sector. Which one to choose ? Who will win Banks or NBFC. It is 'or' or 'and' ? Although NBFCs are no replacement of Banks but they are snatching pie from banks in car loans, personal loans, mortgage, insurance, AMC, MF distribution, insurance advisory etc. One of the oldest and prestigious financial entity is NBFC..HDFC. Some of old NBFC like IDFC, IDBI (not pure NBFC), IFCI are either getting traction or already got. New avatar NBFCs by Fullerton, GE money, Indiabulls, FC are making strong impression in the markets. Many are in pipeline...RelCap, India infoline, Motilal oswal, Edelweiss, religare are in the queue. This list is endless to say the least.
Banking has strong advantage of low cost of capital whereas NBFC is relaxed from many capital related parameters. So Let's discuss pros & cons of the segment in this thread by starting a RBI note...what is NBFC ( Akhir ye NBFC kya hota hai) ?
Edited by xbox - 03/Dec/2007 at 7:15am
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kulman
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Posted: 03/Dec/2007 at 7:32am |
Good thread!
- Don't these firangi NBFCs like GE Cap or Fullerton have an advantage as they can raise money at very lower cost overseas?
- Aren't those 'personal loans' usually subscribed by 'sub-prime' category? What could be market size in this segment? And respective market share of Pvt Banks v/s NBFCs?
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basant
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Posted: 03/Dec/2007 at 7:34am |
I think that over the next few years NBFC with private banks will take over market share from PSU Banks.
ENAM believes that NBFCs at 6-12 times Price/Book is very much overvalued and reflect "euphoric" valuations.
Has anyone looked at DBS Chola?
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basant
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Posted: 03/Dec/2007 at 7:41am |
X-Box - It is the PSU banks that are losing market share also NBFC are more into high risk retail lending but if a stock triples in 5 months people do not care less.
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MPD05
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Posted: 03/Dec/2007 at 7:58am |
Originally posted by basant
X-Box - It is the PSU banks that are losing market share also NBFC are more into high risk retail lending but if a stock triples in 5 months people do not care less.
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Agreed, PSU banks are the biggest losers in terms of market share. The government's reluctance to bring down its stake, combined with its inability to fund them by itself, implies that they will be constrained for capital. It is ironic that the Left does not realize that their intransigence on the privatization of PSUs has ensured that the PSU banks, with a few exceptions, are going to be less and less relevant over time! As for NBFCs, their ability to compete depends on their cost of funding. The RBI does not let most NBFCs to source their funding through deposits. For those NBFCs which are permitted to take deposits, RBI has a separate category for regulating them.
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xbox
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Posted: 03/Dec/2007 at 8:16am |
Originally posted by basant
Xbox - It is the PSU banks that are losing market share also NBFC are more into high risk retail lending but if a stock triples in 5 months people do not care less.
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PSU Banks are loosing to Private ones and I suspect story does not end here whereas I wish it ends here.
Kind of business segment in which these NBFC are operating, only private banks are present in any significant manner for example...I can't imagine syndicate bank doing insurance advisory. I does not think these NBFC will close ICICI Bank either.
Every incremental business has more choices in present times so as long as pie is expanding nobody has to worry at all.
Despite all concerns HDFC was biggest mortgage lender in Indian markets (now second only to ICICI Bank, which recently started it aggressively). So in my opinion jury is still out with no sign of conclusion.
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basant
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Posted: 03/Dec/2007 at 9:19am |
Any company/segment that grows higher then the industry average should not lose market share.
Also in times of low interest rates NBFCs gain could be diminished because some banks because of CASA could cut interest rates really low.Not so much for the NBFC guys who still have to pay something for the dposits whereas CASA accounts come with a 2% interest rate.
Any idea if pure NBFCs have become big in the world. GE is one that comes to mind but not sure how big is GE Finance.
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xbox
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Posted: 03/Dec/2007 at 9:43am |
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I am not aware of any as I feel financials are local plays. Govt rules & regulation ensure that only local remain bigger. Most of countries does not permit lending from NBFC, so we may not get global peers.
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