Moody’s Investors Service has lowered its outlook on the US banking system from “Stable” to “Negative”. This downgrade was triggered by heightened risks after the unravelling of SVB Financial and the fears of a broader contagion. The bankruptcy of SVB, Silvergate Capital and Signature Bank has led to the overall banking environment in the US deteriorating. This outlook downgrade reflects a crisis of confidence in the US banking system. According to Moody’s the downside impact of Fed hawkishness is now being visible.
Wholesale price index (WPI) inflation for February 2023 fell to a 25-month low of 3.85% as prices fell across energy and manufacturing. This is fifth month in a row that WPI inflation has been in single digits and has now fallen over 1200 basis points from the peak. Incidentally, retail inflation has fallen just a fraction of that. However, food inflation did scale up to 3.81% on fears that the heat wave could impact the Rabi crop too. Cereals inflation continues to be elevated. Retail inflation is still well above 6% mark.
US consumer inflation eased by another 40 bps in February 2023 to 6.0% on yoy basis. However, the MOM inflation has increased by 0.4%, showing short term high frequency pressure on prices, especially food. Higher rental costs and higher food expenses could push the US Federal Reserve to go for another rate hike in its late March FOMC meeting. However, the SVB crisis could be the joker in the pack and could make the Fed a more cautious about being too aggressive on rate hikes. March Fed meet will be crucial.
Bandhan Group is also planning to foray into the insurance business. Bandhan group started off as a micro-finance company, then got a banking license from the RBI and now also has bought IDFC Mutual Fund, Insurance will complete the palate of financial services and Bandhan plans to largely focus on the tier-2 and tier-3 cities with micro products for its microfinance customers. For now, Bandhan is open to taking the organic route or the inorganic route for insurance foray. It current offers insurance as agency business.
NCLT approved the resolution plan by GAIL to take over JBF Petro for Rs2,079 crore. JBF Petro has debt of Rs7,918 crore. Apart from IDBI Bank, other secured creditors include Union Bank, BOB, EXIM Bank and IOB. Lenders have made claims of Rs4,584 crore, but NCLT admitted Rs4,662 crore. Bankers will get 43.2% of dues but recoveries of operational creditors are much lower. IOCL had taken over bankrupt Mercator Lines through the IBC route. JBF has the capacity to produce 1.25 MTPA of purified terephthalic acid (PTA).
The Competition Commission of India (CCI) approved the Rs2,850 crore bid by Reliance Industries for the wholesale operations of Metro AG. RRVL will buy 100% of Metro Cash & Carry for Rs2,850 crore in cash after Germany based Metro AG decided to exit Indian operations. Reliance already has a strong retail reach but Metro will also give them presence in the wholesale space. Metro currently has 31 large format stores across 21 cities in India. Reliance was always interested in the multi-channel B2B business in India.
If you thought that SVB Bank is just a small bank in California, think again. Financial stock globally lost nearly $465 billion in market can just 2 days this week. Now, the panic is building up as they expect more banks to get into trouble. The fall has been palpable across the US, Europe, and Asia. One view is that the Fed may pause on rate hikes to prevent this problem from worsening. Most regional banks in the US are already seeing a run on the deposits. The Fed hawkishness was responsible in large measure for this crisis.
A JV between HCC Ltd and Megha Engineering won an order worth Rs3,681 crore for construction of Bandra-Kurla Complex Station as part of the Mumbai-Ahmedabad bullet train project. The BKC station will be the only underground station on this line. It is expected to be a world-class station with amenities like waiting area, business-class lounge, nursery, smoking rooms and information kiosks. The station will have 6 platforms with ability to accommodate 16-coach bullet trains. It would be centrally located in Mumbai.