Poor credit demand may hit deposit growth in H2

Mumbai, Oct 28: Close to 70 senior bank executives are in the fray to occupy the corner room office of the Chief Executive and Managing Director of the Tamil Nadu-based lender, Laxmi Vilas Bank.

The Chennai-headquartered mid-sized private sector bank has been headless since midSeptember after the then chief executive Parathasarathy Mukherjee left before the completion of his three-year term.

The bank, which has been placed under the prompt corrective action by the monetary authority since August for low capital buffer and higher NPAs coupled with mounting losses, is scheduled to complete the process by November 10.

“We have received as many as 68 applications for the post of Chief Executive and Managing Director, signalling higher interest in the nearly 100-year- old private sector bank,” a bank source told PTI.

Senior executives from leading private sector lenders like ICICI Bank, Kotak Mahindra Bank, Axis Bank, foreign lender Standard Chartered Bank and public sector bank Canara Bank have applied for the post, the source added.

The list also has a few turnaround specialists who have the trackrecord of making lossmaking banks profitable, the source said.

The recruitment process, which is currently underway, will get over by November 10 and the new management will take charge by the first week of December if the Reserve Bank approval comes in.

The new chief executive's focus will be to turn around the bank, which has already initiated a slew of measures for faster recovery, added the source.

While banks have been able to raise money through deposits, lack of credit demand from corporate clients is forcing them to park their funds in government bonds. Analysts expect deposit growth to further slow down and move in tandem with credit growth during the remaining five months of this fiscal as any significant expansion in loans to large industries remains unlikely.

Banks may further cut deposit rates to protect their margins as lending rates continue on a downward trajectory.

“Unless the demand picks up from corporate clients, the overall credit growth is likely to remain modest. And growth in deposits will be a function of credit demand. The growth rate on deposits could move in tandem with growth in credit for the second half of FY20,” said Karthik Srinivasan, Senior Vice President &

Group Head-Financial Sector Ratings, at IcraLtd.

According to the latest data released by the Reserve Bank of India, deposit growth continues to outpace credit growth, which has lost momentum. Banks have mobilised Rs 31,070 crore of deposits during the fortnight ended October

11, the RBI data showed. Outstanding aggregate deposit was Rs 129.37 lakh crore. The deposits grew

9.8 per cent year-on-year to Rs 11.51 lakh crore and by 2.9 per cent to Rs 3.63 lakh crore in the financial year so far.

However, continued credit growth to languish despite the festive season and government measures such as loan melas. The outstanding non-food credit growth grew by a mere 0.22 percent between September 27 and October

11. The incremental nonfood during the period was Rs 21645 crore and the outstanding credit stood at Rs

97.88 lakh crore as on October 11. On a year-onyear comparision of the October 11 fortnight with the same period in 2018, the non-food credit growth was 8.8 per cent to Rs 7.95 lakh crore.

The Indian economy is being held back by a large squeeze in credit availability emanating from non-bank financial companies (NBFCs), Fitch Ratings said last week. “Our economics team's latest Chart of the Month shows that, assuming the sluggish pace of lending is maintained throughout the year, total new lending will amount to only 6.6 per cent of GDP in the fiscal year 2019-2020, down from

9.5 per cent in the previous fiscal year.”

Paris, Oct 28: French luxury giant LVMH said on Monday it was in preliminary talks to take over US jewellers Tiffany but there was "no certainty" that they would be successful.

A source close to the talks told AFP at the weekend that LVMH had made a bid for Tiffany at the start of October, but that the iconic US company had yet to respond.

Tiffany, in a separate statement Monday, confirmed "an unsolicited, non-binding proposal" from the French conglomerate, saying it was for $120 per share, which values the company at around $14.5 billion.

Tiffany's stock market value stood at $11.9 billion at the close of Wall Street trading on Friday.

The US company said there were no actual discussions going on but it was "carefully reviewing" the proposal.

LVMH said earlier Monday that "following recent market rumours, the LVMH group confirms having started preliminary discussions about a possible operation with Tiffany".

The purchase of Tiffany by LVMH would be one of the largest acquisitions by the French group, which is a world leader in luxury, present in fashion to wine, perfumes and cosmetics.

LVMH's share price was mildly higher following the announcement, rising 0.3 percent to 384.90 euros in early afternoon Paris stock trading.

Tiffany's stock was set to surge by more than 30 percent, according to pre-market quotes, under an hour ahead of Wall Street's session opening.

This seemed to indicate that traders not only expected the bid to go ahead but that LVMH would sweeten its offer.

Tiffany's Bulgari brand —bought for $5.2 billion in 2011—competes with

Cartier and Van Cleef & Arpels, both owned by Swiss group Richemont.

"They say diamonds are a girl's best friend and Europe's richest man, and owner of Louis Vuitton Bernard Arnault, obviously feels that adding US jeweller Tiffany to his list of brands will prompt a similar uplift to LVMH's global revenues,” said Michael Hewson, chief market analyst at CMC Markets UK.

“His attempt to put a $14.5 billion ring on Tiffany, having already added Bulgari a couple of years ago, is likely to take the fight in this sector to its closest rival Richemont, who own Cartier, and would help LVMH in gaining better access to US markets,” he said.

Hewson added, however, that Tiffany shareholders were “unlikely to accept this initial bid” and could hold out for more.

Tiffany's profits and sales have been hit hard from the fallout in the US-China trade war and unrest in Hong Kong, he noted.

By Friday's close, Tiffany's share price was down nearly eight percent from its year-earlier level.

The luxury industry is jittery, not just over the trade war but also because of a broad anticorruption campaign launched by Chinese president Xi Jinping which has put the brakes on extravagant gifts offered by businessmen and bureaucrats.

The discussions between the two companies come after LVMH owner Arnault inaugurated a Louis Vuitton factory in south Texas alongside US President Donald Trump and his daughter Ivanka.

Tiffany's flagship New York store is next to Trump Tower on 5th Avenue.