IDBI Bank in black after 13 quarters

Makes a strong pitch for exiting PCA restrictions; asset quality improves

IDBI Bank has reported a net profit of ₹135 crore for the quarter ended March 31, 2020 compared to with a net loss of ₹4,918 crore in the year-earlier period.

The lender posted a net profit after a gap of 13 quarters as additions to non-performing assets fell sharply during the quarter.

“First time NPAs reduced to ₹727 crore in Q4-2020 from the ₹1,781 crore in Q4-2019,” the bank said.

“The profit would have been higher but for the recoveries which were adversely affected during March due to COVID-19 impact,” said Rakesh Sharma, MD & CEO, IDBI Bank in an interaction with the media.

 

The net NPA ratio improved to 4.19% as on March 31, 2020 against 10.11% as on March 31, 2019 and 5.25% as on December 31, 2019. The gross NPA ratio stood at 27.53% as on March 31, 2020 against 27.47% as on March 31, 2019 and 28.72% as on December 31, 2019.

“All the parameters have shown improvement. Net NPAs have also come down and aging provisions are evenly spread so that there is no extra burden,” he said.

Improved CAR

Tier 1 capital and capital adequacy ratio (CAR), which was at 10.57% and 13.31% respectively as on March 31, 2020, have improved as against 9.14% and 11.58% as on March 31, 2019.

“The bank has achieved all PCA parameters for exit, except RoA,” the lender said.

While there is an overall write-back in provision of ₹1,511 crore during the quarter compared with the ₹7,233 crore provided during the fourth quarter of the previous year, a ₹247-crore provision was made against standard assets as per Reserve Bank of India (RBI) norms for moratorium accounts which are in default.

While the central bank had allowed the lenders to make the provision in two quarters, IDBI Bank had made the entire provision in the January-March quarter.

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Airports open their doors for domestic passengers after two months

Domestic air travel resumed on May 25 after two months even as a number of States were unenthusiastic about opening up their airports in view of rising COVID-19 cases causing around 630 flights to be cancelled.

According to aviation industry sources, around 630 domestic flights of May 25 were cancelled due to the Centre’s May 24 night announcement that there would be no flights in West Bengal and Andhra Pradesh, and limited operations at major airports such as Mumbai, Chennai and Hyderabad.

Consequently, many passengers reached the airports on May 25 only to be told by the airline staff that their flights have been cancelled. Many people took to social media to vent their anger.

(Text: PTI)

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Traders ‘deeply disappointed’ with govt.’s economic package

CAIT says it will seek the immediate intervention of the Prime Minister.

Expressing “deep disappointment” with the government’s ₹20 lakh crore economic package, the Confederation of All India Traders (CAIT) on May 17 said it would now seek the immediate intervention of Prime Minister Narendra Modi for support.

The organisation, which represents about seven crore traders across the country, said they had been completely sidelined by the government while preparing the much-awaited economic package.

The CAIT, which has been a fairly vocal supporter of the BJP-government, expressed its “deep disappointment” and “resentment” against the government for the “step-motherly treatment”.

In a statement, CAIT national president B.C. Bhartia and secretary general Praveen Khandelwal said, “The traders will be landing into a great financial crisis on lifting of lockdown as they will have to pay salary, interest, bank loans, taxes and various other financial obligations. It is expected that nearly 20% traders will have to wind up their business and another 10% traders dependent on these 20% traders will have to close their business.”

Under such a grim situation, they said, the government had refused to handhold the traders. “It’s a pity that such an important sector of the economy has been greatly overlooked…The traders of India have been called as the backbone of the economy on several occasions by the Prime Minister and even in these extremely troubled circumstances the Kirana retailers have displayed their true character as corona warriors and ensured the supply of essential commodities.”

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Tech to decongest cafeteria operations during peak hours, enabling social distancing

As countries across the world prepare to start lifting the lockdown, organisations are gearing up to commence operations and have made it their topmost priority to ensure a safe environment for their employees/consumers, especially in highly-crowded areas such as the office Cafeteria and IT Park food courts. In its endeavour to help the organisations in these testing times, SmartQ, a B2B food-tech platform, today announced the launch of Smart Pass, to decongest cafeteria during peak hours.

SmartQ’s Smart Pass is a slot-based booking and allocation system, focusing on the safety and convenience of the user while providing the authority and flexibility of booking time slots based on their schedule. They can book the desired slot and also pre-order the food. The technology allows the user to view the seats booked and seats available for each slot on a real-time basis. The Smart Pass app facilitates the distribution of the crowd in the cafe uniformly across the meal breaks, thus flattening the curve and ensuring physical distancing gets automatically enabled. The number of slots, duration of each slot, and the number of employees allowed in each slot can all be easily set up by a self-service control dashboard for clients.

The technology is aimed at decongesting the peak time cafeteria crowd, enabling contactless and cashless pre-ordering of food.

Commenting on this development, Keshav Meda, Co-founder and Chief Business Officer, SmartQ, said, “For the Smart Pass product, we have already received interest from seven countries across the world including New Zealand, USA, Germany and a few other European Countries. We have got a nod from a few corporates in Germany where we will be going live in the next couple of weeks. For the clients from Germany, we are also customizing the app to enable the functionality in German Language, and likewise for other non-English speaking countries.”

SmartQ clocks 1,70,000+ daily transactions, SmartQ has grown to 150+ client sites in India and globally.

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Why has the Reserve Bank of India opened a liquidity window for mutual funds?

What are the concerns about the mutual funds industry?

The story so far: In view of the possible redemption pressure that the mutual fund industry may face after the abrupt winding up of six debt schemes of Franklin Templeton Mutual Fund, the Reserve Bank of India (RBI) on Monday announced a special liquidity window of ₹50,000 crore for mutual funds. Under the scheme, the RBI will conduct repo (repurchase agreement) operations of 90-day tenor at a fixed repo rate of 4.40% for banks. According to the RBI, banks can avail funds under this facility exclusively for meeting the liquidity requirements of mutual fund houses by extending loans and undertaking outright purchase of and/or repos against the collateral of investment grade corporate bonds, commercial papers (CPs), debentures and certificates of deposit (CDs) held by the fund houses. The scheme will be open till May 11 or up to utilisation of the allocated amount, whichever is earlier.

Also read | Why Franklin closed 6 funds

Why was it needed?

The trigger for the liquidity window was Franklin Templeton Mutual Fund’s decision to wind up six debt funds that had a combined assets under management (AUM) of almost ₹26,000 crore. The fund house said that it decided to wind up the schemes to preserve the value at prevailing levels — their value had eroded because of redemption pressures and mark-to-market losses due to lack of liquidity on account of the COVID-19 pandemic. That led to fears that the debt funds of many other fund houses could face redemption pressure accentuated by the panic sparked by Franklin Templeton Mutual Fund’s sudden move.

Are mutual funds’ debt schemes under pressure?

While the mutual fund industry clarified that what had happened at Franklin Templeton Mutual Fund was an isolated case, wider liquidity and other concerns persist. A couple of fund houses have already seen huge erosion in the net asset values of a few debt schemes post the Franklin Templeton episode due to mark-downs of their holdings. Incidentally, till date, banks have borrowed about ₹2,000 crore through the RBI liquidity window for mutual funds. Market observers say debt schemes are under pressure due to a combination of factors.

Podcast | Franklin Templeton fiasco: What does it mean for investors in mutual funds?

How much debt assets do mutual funds manage?

The AUM of debt schemes of the mutual fund industry is about ₹15-lakh crore, which is more than half of the total AUM of Indian fund houses. The worst affected sub-category of debt funds is Credit Risk funds that account for only 5% of the overall debt assets. Investors, however, are sceptical about the overall credit quality of the assets; hence debt schemes are likely to see a spike in redemptions. Mutual funds are allowed to borrow up to 20% of their assets to meet liquidity needs for redemption or dividend pay-out. As of April 23, four mutual funds — of a total of 42 fund houses — had a cumulative borrowing of ₹4,427.68 crore, according to the Association of Mutual Funds in India (AMFI). Fund managers say that while such borrowings are common in March — there are huge redemptions due to advance tax payment and other quarter-end obligations — a spillover of such borrowings to April is a cause for concern.

What is the quality of debt securities held by mutual funds?

Fund managers are of the view that more than half of the assets in debt schemes have a rating of AA or above. They say that while about 20% to 30% of total debt AUM would be AAA rated or in cash, another 30% to 50% would be in AA+ or AA rating. While the overall debt quality, based on current ratings, looks good on paper, the ongoing nationwide lockdown has impacted cash flows of most corporates, and investors are expecting defaults especially from the mid and small-sized corporate segment.

Also read | Debt funds less exposed to risky issuers after IL&FS fiasco: Morgan Stanley

What are the regulators doing?

The regulators are aware of the potential risk and are monitoring the situation closely. Market participants have already written to the Securities and Exchange Board of India (SEBI) to take action against Franklin Templeton Mutual Fund including appointing a high-powered committee to take over the management of the fund house while examining its investment decisions. The Association of National Exchanges Members of India (ANMI), an umbrella body representing about 900 brokers, has written to the Ministry of Finance and SEBI that as much as 64.73% of the total AUM of Franklin India Low Duration Fund was in securities rated A or below, while in Franklin India Short Term Income Plan, such securities accounted for almost 59% of total assets. The brokers’ association says Franklin Templeton Mutual Fund invested in long duration securities even though SEBI norms state that ultra short duration funds can only have bonds with a tenure between three and six months.

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Chevron dividend 'safe and secure,' CEO promises

Chevron CEO talks ‘playbook’ for dealing with a downturn

Chevron CEO Michael Wirth discusses company earnings in the face of unprecedented times and his outlook for the oil industry amid the coronavirus pandemic.

Chevron's quarterly dividend remains "safe and secure," despite upheaval in the oil market that ravaged competitors less prepared for an economic swoon, CEO Michael Wirth said.

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The oil giant entered the downturn with a strong balance sheet and has taken "strong and decisive action to maintain that strength," enabling it to keep up the quarterly payout of $1.29 a share, Wirth told FOX Business' Maria Bartiromo on Friday.

The San Ramon, California-based company said earlier that it would cut capital spending by as much as $2 billion in addition to a previous reduction of $4 billion, taking this year's outlay to as little as $14 billion.

"We know what to do, and we're doing it in the face of a market we've never seen before," Wirth said. "These are certainly unprecedented conditions."

Rival Exxon Mobil said last month it would slash capital expenditures by 30 percent and reduce operating expenses by 15 percent in order to protect its 87-cent per share dividend, and Reuters has reported that Chesapeake Energy, a leader in the shale boom, is preparing for a possible bankruptcy filing.

CHEVRON SLASHES COSTS TO PRESERVE DIVIDEND

Crude oil has tumbled 67 percent this year after Russia and Saudi Arabia began a price war when the Kremlin refused to lower production in tandem with members of the Organization of Petroleum Exporting Countries, or OPEC, to curb the effects of a supply glut.

The surplus grew exponentially worse when governments around the world began shutting down their economies in March to curb the spread of the COVID-19 pandemic, a move that choked fuel demand as consumers refrained from driving their cars as well as flying.

"We've never seen governments around the world restrain economic activity the way we've seen here," Wirth said.

EXXON TAKES $2.9B WRITEDOWN AS CORONAVIRUS RAVAGES OIL MARKET

Demand in the energy industry typically shifts far less, he said, with ups and downs hovering tightly around a long-term trend level. Still, the playbook for coping is no secret, Wirth said: "It really is how you execute."

While many energy projects take a decade or more to design and build, a so-called "long cycle," Chevron benefits from a larger share of short-cycle projects that can be paused and resumed more rapidly, including shale drilling in the Permian Basin in the southwestern U.S.

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"We can respond in months and quarters, not years," Wirth said. "When there's a signal from the market that there's plenty of supply, that's the first place we can go to preserve cash, keeping oil in the ground. We have flexibility in our company that we haven't historically had, and that serves us well at a time like this."

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Coronavirus | Virgin Australia collapses to crisis, appoints administrator to find investor

Airlines around the world have been seeking government aid to survive after grounding the bulk of their fleets.

Virgin Australia Holdings Ltd on Tuesday succumbed to third-party led restructuring that could lead to a sale, making Australia’s second-biggest airline the Asia-Pacific region’s biggest victim of the coronavirus crisis gripping the industry.

Airlines around the world have been seeking government aid to survive after grounding the bulk of their fleets due to an unprecedented plunge in travel demand that is forecast to cost the industry $314 billion in revenue.

Virgin reported an annual loss for seven consecutive years even before authorities worldwide began restricting movement to slow the spread of the virus, which has led to around 70 deaths in Australia. It nevertheless commanded a secure share of Australia’s normally lucrative domestic aviation market before calling in administrators with debt of A$5 billion ($3.15 billion).

More than 10 parties have already expressed interest in recapitalising Virgin, which is continuing to fly a skeleton schedule under its current management team, said Vaughan Strawbridge of Deloitte.

Virgin appointed Strawbridge as voluntary administrator to lead a sales process after the government rejected a plea for a A$1.4 billion loan to keep the airline afloat.

“Generally you get the best outcome where you sell it as a whole, so that is definitely the preferred approach,” Strawbridge told reporters on a teleconference.

A sale is most likely to involve a deed of company arrangement, which is a binding agreement with creditors, and the aim is to complete the sale within a few months, he said.

Australian private equity group BGH Capital is among the interested parties, two people familiar with the matter told Reuters on condition of anonymity. BGH declined to comment.

Administration is Australia’s closest equivalent to the Chapter 11 bankruptcy provisions used to restructure companies in the United States.

Moody’s said unsecured creditors were likely to take a significant haircut on the value of their debt as part of any deal, and that it might be preferable to putting the company in liquidation with uncertain recovery prospects.

The government has appointed Nicholas Moore, who for a decade led investment bank Macquarie Group Ltd, to engage with the administrator to find a “market-led solution” with a view to keeping two airlines on key routes, Treasurer Josh Frydenberg told media at a separate briefing.

Virgin employs 10,000 people directly and 6,000 people indirectly. It competes with larger rival Qantas Airways Ltd , which would have a virtual monopoly in Australia if Virgin stopped flying. Qantas’ share price jumped as much as 7.2% on Tuesday to its highest since March 12 before the gain narrowed sharply to 0.3% in afternoon trade.

Virgin, which grew rapidly after the 2001 collapse of Australia’s then second-largest carrier Ansett, has a share of around one-third of the domestic market but that could decline under a restructuring plan.

Rico Merkert, a professor of transport at the University of Sydney Business School, said Virgin should focus on running a core fleet of Boeing Co 737 planes on domestic capital city routes rather than also flying regional turboprops and widebodies both at home and abroad.

Strawbridge said the airline was seeking talks with Boeing about the future of its order for 40 737 MAX planes. The model has been grounded globally for over a year after two fatal crashes.

More than 90% of Virgin’s shares are controlled by a group of investors including Singapore Airlines Ltd, Etihad Airways, Chinese conglomerate HNA Group and Richard Branson’s Virgin Group, which have all suffered a sharp deterioration in revenue because of the pandemic.

Branson on Twitter said his company would work with administrators, management, investors and government to return Virgin Australia to health.

Etihad said in a statement that it had worked with the company and stakeholders in recent weeks to try to find a solution and avoid administration, but it was unable to provide funding to Virgin due to the impact of the coronavirus crisis on its own business. Singapore Airlines declined to comment, while HNA and Nanshan could not be reached immediately for comment.

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10 years after BP spill: Oil drilled deeper; rules relaxed

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NEW ORLEANS — Ten years after an oil rig explosion killed 11 workers and unleashed an environmental nightmare in the Gulf of Mexico, companies are drilling in deeper and deeper waters, where payoffs can be huge but risks are greater than ever.

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Industry leaders and government officials say they’re determined to prevent a repeat of BP’s Deepwater Horizon disaster, which spilled 134 million gallons of oil that fouled beaches from Louisiana to Florida, killed hundreds of thousands of marine animals, and devastated the tourist economy.

This April 21, 2010 file photo shows the Deepwater Horizon oil rig burning after an explosion in the Gulf of Mexico, off the southeast tip of Louisiana. (AP Photo/Gerald Herbert, File)

OIL TUMBLES TO 18-YEAR LOW AS CORONAVIRUS DINGS CHINA GDP

Yet safety rules adopted in the spill’s aftermath have been eased as part of President Donald Trump’s drive to boost U.S. oil production. And government data reviewed by the Associated Press shows the number of safety inspection visits has declined in recent years, although officials say checks of electronic records, safety systems and individual oil rig components have increased.

Today, companies are increasingly reliant on production from deeper and inherently more dangerous oil reserves, where drill crews can grapple with ultra-high pressures and oil temperatures that can top 350 degrees (177 degrees Celsius).

Despite almost $2 billion spent by the industry on equipment to respond to an oil well blowout like BP’s, some scientists, former government officials and environmentalists say safety practices appear to be eroding.

“I’m concerned that in the industry the lessons aren’t fully learned — that we’re tending to backslide,” said Donald Boesch, a University of Maryland professor who was on a federal commission that found the BP blowout was preventable.

After the spill, oil giants created the Marine Well Containment Co., which has equipment and vessels ready to respond if another major spill occurs.

“All of industry wanted to make sure that nothing like it could ever happen again,” said company CEO David Nickerson at the company’s complex, near Corpus Christi on the Texas coast.

David Nickerson, CEO of Marine Well Containment Company, points to the hydrocarbon train that fits on top a oil spill disaster response tanker, in Ingleside, Texas. (AP Photo/John L. Mone)

CORONAVIRUS STRIKES OIL RIGS IN GULF OF MEXICO

Industry leaders say the administration’s rule changes allow companies to deviate from “one-size-fits-all” standards not always suited to water pressure and other conditions at individual wells.

Companies also have a financial interest in avoiding a repeat of an accident that has cost BP more than $69 billion in cleanup expenses, fines, fees and legal settlements.

The rule changes under Trump, including less frequent safety tests, are projected to save energy companies $1.67 billion over a decade.

An AP review found inspection visits by the U.S. Bureau of Safety and Environmental Enforcement — created in the 2010 disaster’s aftermath — went down more than 20% over the past six years in the Gulf.

Bureau spokesman Sandy Day said government inspection data AP gathered reflects visits by inspectors to rigs, platforms and other facilities. But Day said the data doesn’t show electronic records reviewed remotely or the increased time spent at each facility and all the inspection tasks performed. Those, he said, have increased from 9,287 in 2017 to 12,489 last year.

“While on the facility we did numerous inspections of different items,” Day said, including equipment meant to prevent major accidents. He added that electronic records allow more work to be done from shore, rather than on site.

Industry advocates say the drop reflects greater emphasis on complex systems that influence safety and note that there are fewer, if much bigger, active oil platforms.

As wells close to shore run dry, the average drilling depth in deeper waters steadily increased, from about 3,500 feet (1,070 meters) beneath the surface in 1999 to more than 4,600 feet (1,400 meters) in 2019, according to AP analysis of data from the U.S. Interior Department’s Bureau of Ocean Energy Management.

Drilling deeper makes well sites harder to reach in a blowout or other accident.

In this June 3, 2010 file photo, a Brown Pelican is mired in oil from the Deepwater Horizon oil spill, on the beach at East Grand Terre Island along the Louisiana coast. (AP Photo/Charlie Riedel, File)

TRIBES PRESS JUDGE TO HALT US-CANADA PIPELINE AS WORK STARTS

In the past year, the industry began producing crude from ultra-high pressure reserves in the Gulf, where well pressures can top 20,000 pounds per square inch, much more than Deepwater Horizon.

“Higher risk, higher pressure, higher temperatures, more reliance on technology — it’s just a tougher environment to operate in,” said Lois Epstein, a Wilderness Society civil engineer who served on a government advisory committee formed to improve drilling safety after the spill.

The safety debate has recently centered on rules for keeping wells under control, such as requirements for blowout preventers that failed in the Gulf spill.

Under Obama, companies were required to test devices every 14 days. The Trump administration allowed companies upon approval to test every 21 days, saying more frequent testing would risk equipment failure under extreme conditions.

Inspection visits by the government’s safety bureau fell from 4,712 in 2013 to 3,717 in 2019, according to data reviewed by AP. The decline coincided with increased focus on higher risk facilities, including those with historical problems.

Warnings and citations to companies for safety or environmental violations peaked in 2012 and have since fallen faster than inspection visits. The decline accelerated under the current administration.

Fewer inspections and citations suggests safety improvements after the spill are unraveling, said Matt Lee-Ashley, formerly of the Interior Department.

This April 21, 2010 file photo shows oil in the Gulf of Mexico, more than 50 miles southeast of Venice on Louisiana’s tip, as the Deepwater Horizon oil rig burns. (AP Photo/Gerald Herbert, File)

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Industry representatives contend fewer inspections do not automatically mean less effective oversight. Inspectors are less interested now about technical violations and are trying to make sure comprehensive safety systems are in place to handle major accidents, said Erik Milito, president of the National Ocean Industries Association, an oil trade group.

“There’s got to be an emphasis on your more significant potential incidents, potential blowouts,” Milito said.

Even if companies are prepared for another Deepwater Horizon, they could be overwhelmed by other types of incidents, such as of one of the Gulf’s frequent underwater mudslides wiping out a cluster of wellheads on the seafloor, said Florida State University oceanographer Ian MacDonald.

That could leave the blowout source buried under hundreds of feet of muddy debris, said MacDonald.

“Absent really extraordinary intervention and brand new engineering technology being built as you fly along, you’re not going to stop it,” he said.

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