@The Alchemist wrote:
Re NTB Ceo : No he did not commit any fraud. what happened was, about 2-3 years back, their was a "rogue trader" at the bank who lost approx Rs 700 million in unauthorized forex transactions. As it happened on his watch, he subsequently resigned due to this. ( or may be have asked to go too). But the point is their was absolutely no wrongdoing on his part.
I stand corrected, I knew it was FX related. Either way, going back to the topic, there was a fraud at the bank and it proves their internal controls are not good enough which is probably another reason why its undervalued.
Nuh.. most banks are in kindergarten stage in these areas so internal control alone wont help prevent frauds.
HSBC has the most rigorous controls I've ever heard of, they continuously educate their employees of money laundering activities and other frauds that the bank might be subjected to - yet how much they pay as fines and how many incidents happened for last couple of years?
So my experience says; Business RISK assessment teams + Audits + compliance awareness + internal control in a combinational effort might help to mitigate the risks involved in this area.
Banking is a highly leveraged industry hence closely regulated. So to provide a stable operating environment, many banks will incur additional costs in compliance, risk and IT areas.
We might've underestimated NTB's operations. When I checked lately, it appears that Nations Trust Bank can be considered as a fully integrated financial services provider. See their business line;
- Deposit generation and lending on a secured basis.
- Operation of franchise to issue American Express credit cards
- Extend loans on an unsecured basis.
- Operations of The Treasury,
- Corporate banking business - transactions with large corporate entities.
- SME franchise - mobilising business current accounts, leasing and factoring.
- Insurance broking thru Nations Insurance Brokers
- Investment banking thru Waldock Mackenzie
But why NTB share price is still low ? While I cannot figure out exactly why, bank’s goal is not to have a rapid growth but to sustain as a long running business.. Therefore, their dividends may be low too..
However, in March 2010 Nations Trust Bank had a warrants issue which was fully subscribed. Rs 1.2 billion they received after the conversion of the warrants meant that they easily complied with the capital adequacy requirement too at that time.