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FINANCIAL CHRONICLE™ » FINANCIAL CHRONICLE™ » Rate Cut & BFI Sector ?

Rate Cut & BFI Sector ?

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1Rate Cut & BFI Sector ? Empty Rate Cut & BFI Sector ? Fri May 10, 2013 11:59 pm

sanju351

sanju351
Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
What will be the Impact for the Banks and Finance sector with the Rate cut ..
Some says it will strengthen their values and may have a Run ?

Experts kindly educate the others so that they can make use of the knowledge to their PF Value increase ..

2Rate Cut & BFI Sector ? Empty Re: Rate Cut & BFI Sector ? Sat May 11, 2013 12:11 am

traderathome

traderathome
Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
Should give a run to their money... Very Happy
atm eyeing HNBN and SAMP

Good luck
TAH

3Rate Cut & BFI Sector ? Empty Re: Rate Cut & BFI Sector ? Sat May 11, 2013 8:21 am

anu

anu
Manager - Equity Analytics
Manager - Equity Analytics
1. Corresponding reduction in corporate lending rates - heavily borrowed groups and companies will see their bottom line improve due to reduction in interest rates and thus interest cost. Borrowers across the board will benefit.

2. B & FI will reduce deposit rates - depositors will explore ways to improve their return - including investing in CSE.

3. It will spur credit growth. Possibly, inflation can go up and IMF will start shouting.

4. Due to lesser interest cost, imports can go up and balance of payments can again be affected - negative impact.



4Rate Cut & BFI Sector ? Empty Re: Rate Cut & BFI Sector ? Sat May 11, 2013 8:31 am

anu

anu
Manager - Equity Analytics
Manager - Equity Analytics
@sanju351 wrote:What will be the Impact for the Banks and Finance sector with the Rate cut ..
Some says it will strengthen their values and may have a Run ?

Experts kindly educate the others so that they can make use of the knowledge to their PF Value increase ..

Reduction of lending rates will have a corresponding reduction in deposit interest rates. So there will not be a change in the margins earned by BFI. There can be a timing difference - between the deposit / lending rate reduction to take full effect on asset/liability of the B & FI - which can be positive or negative to the profitability of a bank. Say, a bank has a large fixed deposit portfolio, which will take time to adjust the interest rate as the bank has to wait till maturity. But due to market demand, the bank needs to reduce lending rates. In this case, the average deposit rate will be higher and the rate reduction will affect the bank's profitability until FD rates fully get adjusted in due course.

5Rate Cut & BFI Sector ? Empty Re: Rate Cut & BFI Sector ? Sat May 11, 2013 9:15 am

manula


Vice President - Equity Analytics
Vice President - Equity Analytics
@anu wrote:

2. B & FI will reduce deposit rates - depositors will explore ways to improve their return - including investing in CSE.


If they turn to CSE will be fine. There has to be good programms turn the depositors to the CSE

6Rate Cut & BFI Sector ? Empty Re: Rate Cut & BFI Sector ? Sat May 11, 2013 9:35 am

Slstock

Slstock
Director - Equity Analytics
Director - Equity Analytics
This can be circular. Even if some people withdraw to put in CSE, when people gain profits from stock market they may decide to deposit bank into banks. Also if more people join in, margin trading may become more prominent at CSE. If this continues for 1-2 years eventually banks and some fianance companies can benefit.

Just another thought

Just as bad news and economic environment killed CSE, when good news comes one after the other many thing might improve including a better environment for companies borrow and expand.

7Rate Cut & BFI Sector ? Empty Re: Rate Cut & BFI Sector ? Sat May 11, 2013 11:54 am

worthiness


Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
Vicious cycle of any economy shows the positive sings of some indicators & negative effect of others. Balancing of the outcome of those indicators is the tedious task. Simply, as indicated above, lower interest rate causes to boost the inflation as the level of borrowings increase. Good economist in this forum can explain this cycle well.

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