LIC raises stakes in private lenders, trims in PSU peers

Tags: Companies

Insurer largest institutional shareholder in most lenders

LIC raises stakes in private lenders, trims in PSU peers
The Life Insurance Corporation of India (LIC) raised stakes in private sector banks over the past one year even as it pruned holdings in public sector lenders. With the recent share purchases, LIC’s stakes in most banks now tower over any other domestic or foreign institutional investor.

The insurance behemoth bought 85.46 lakh Axis Bank shares from the government-owned specified undertaking of the Unit Trust of India (SUUTI) on Friday to take its holding from 9.72 per cent at the end of the December quarter to 11.14 per cent. In just over a year ago, it held just 8.87 per cent stake in the lender on December 31, 2012.

Bharat M Shah, head of institutional business at Ventura Securities, said Axis Bank looked like a good bet, as its estimated gross NPA and net NPA for FY16 at 1.5 per cent and 0.6 per cent, respectively, compare favourably with its peers.

The public sector insurer also raised stake in ICICI Bank from 7.63 per cent to 9.70 per cent this year. Deutsche Bank is the only institutional investor holding a bigger stake in the country’s largest private sector lender at 29.16 per cent.

LIC owns 4.67 per cent in HDFC Bank, which has remained largely unchanged from the year-ago period, when it was 4.68 per cent.

Private sector banks have been the toast of market analysts, thanks to low bad loan volumes. Among other private sector lenders, YES Bank has seen the life insurer raise stake from 4.97 per cent a year ago to 7.58 per cent at the close of the December quarter. The March quarter shareholding data will be available only in April.

“The private sector banks are favourably positioned versus their public sector peers to expand their balance sheets as the economy recovers, mainly due to better capital positions, improved liability structures and lesser NPAs. On the other hand, balance sheet growth of the PSBs (barring large ones like SBI, PNB, BoB) is likely to be constrained for want of capital and rising NPAs,” brokerage Sharekhan said in a banking sector analysis last week.

It said despite the recent run-up in the private bank shares, Axis Bank, YES Bank and Federal Bank are trading at a 15-25 per cent discount to their respective five-year mean valuations.

LIC has been pruning stakes in some public sector banks in view of the risk of high NPA levels. LIC’s stake has come down from 9.99 per cent to 5.44 per cent in Central Bank of India and from 14.02 per cent to 12.94 per cent in Punjab National Bank during the year.

However the largest PSU lender, State Bank of India, has seen its stake climb up from 10.66 per cent at the end of the December quarter of 2012 to 14.99 per cent now. The insurer raised holding in SBI during the bank’s qualified institutional placement issue.

LIC cut its holding from 25.49 per cent to 22.54 per cent in Corporation Bank over the last four quarters, from 13.47 per cent to 11.82 per cent in Bank of India and from 11.99 per cent to 11.44 per cent in Bank of Baroda.

Stock analysts remain cautious on the public sector lenders.

JP Morgan analysts Seshadri K Sen, Dhiren C Shah and Josh Klaczek said asset quality would continue to worsen for all PSU banks for at least two more quarters, given the weak economy and elevated interest rates. “Credit costs will keep rising beyond that due to the lagged impact of recent delinquencies,” they said.

raviranjan@mydigitalfc.com

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