BankMuscat sells stake in Indian bank
That seems to have come round very quickly. Today, The Hindu Business Line reported that BankMuscat had confirmed that it had sold 81% of its stake in HDFC realising RO39 in pre-tax profits. BankMuscat had held a 2.13 per cent stake in HDFC Bank as on December 31, 2008.
Apparently, Bank Muscat acquired the HDFC Bank stake when HDFC acquired Centurion Bank of Punjab in India.
The income will be welcome given that BankMuscat has forecast losses of RO4 million to RO7 million in the first quarter of this year relating to its equity portfolio, about which no further details were published. Evidently, the bank is guarding its cash flow status.
Yesterday, BankMuscat announced that it would be issuing a 20% dividend and a 30 per cent convertible bond to its shareholders for the financial year ended 31st December 2008.
So despite forecast losses, the shareholders are not to be deprived of annual income.
Although, the bank's operating profit rose 48.7 per cent to RO152.6 million from RO102.6 million in 2007, net profit for the year was only 11.2% more than that in 2007, after writing off "impairment losses" - bad loans?
Comments
muscati wrote:
muscati wrote:
newsbriefs wrote:
Many thanks for the update Muscati
newsbriefs wrote:
An Indian venture capital news site proclaims today (Monday 23rd March), that BankMuscat made a seven-fold return in six years on its original investment in Centurion Bank. http://www.vccircle.com/500...
I'll be honest, the figures make my head swim since, for one thing, I'm not used to dealing with rupees and crore. There seems to be an editorial error with pre-tax profits quoted at RO3.9 rather than RO39m.
muscati wrote:
According to the site you linked, BM sold HDFC at aroun 800 rupees per share. The 52 week high for the bank is around 1500 ruppes per share. If BM had sold at the peak last year the almost double!
newsbriefs wrote:
Well, as I said, I was a bit guarded dealing with rupees etc, and I wasn't sure of the provenance of the article.
However, Reuters India repeated it word for word! http://in.reuters.com/artic...
Actually the bank has been very transparent about what the impairment losses are. They even announced them before announcing the annual results. None are from bad loans. They are mostly from their investment in Pakistan when they acquired a large stake in Saudi Pak Bank whose value evaporated due to the political situation in Pakistan. The other part of the impairment losses is from the bank's investment portfolio. These two required relatively large provisions which more or less wiped out the bank's 4th quarter earnings. Without them the bank would have closed the year with about 120 million rials of profit. This situation was repeated by most banks in the GCC last year quite coincidentally. If you look into their results most of the big ones ended the year with net profit about the same as as 3rd quarter.
Hindsight, as they say, is 20/20. If the bank had sold its share in HDFC immediately after the merger with Centurion, the net profit would have been more than 100 million rials. But who knew, eh?
Anyhow, with the sale of HDFC shares now, the bank can probably write off the entire Pakistani investment and still make at least as much profit as it made last year. I don't think many banks in Oman are in a position to repeat last year's profits.