India Slowing? : Govt owned Largest Bank from India downgraded

As expected, Govt owned banks continue to suffer in India due to:

1. Corruption coming out
2. Value of Indian Rupee falling making future payments in USD bonds or loans more expensive for large business houses as well as all banks
3. Interest rates rising to 15-20% for borrowings and 10-11% on deposits
4. Stock prices falling. SBI share price has declined 50% since Nov 2010. Not the best sign if the bank is the largest from India and Top 50-60 globally.
5. Lending to real estate and stock brokerages stalling and slow to all other sectors while loan losses rise, making interest revenues to decline substantially. DLF stock price down 50% in 1 year and 83% from peak of INR 1,200 in Jan 08.
6. Outsourcing slowing down from US and Europe indicated by Wipro and Infosys stock prices, down 30% approx in just one year and hindering growth of employment
7. Export companies from India in trouble due to lack of orders from US and Europe and rising tarrifs in most countries such as Gokuldas Exports, which are down only 37% thus far in 1 year but 77% from peak in Mar 2006.
8. To make it all worse, political instability and suspended Govt with no laws having been passed in almost all year.

9. Worse effects of global crisis impacting liquidity and raising borrowing costs for all banks
10. The sole reason interest rates have been hiked by Reserve Bank of India over the last 2 years is to fight high inflation whose negative impact is on slowing growth. High interest rates mean slow rise of banks, bad loans and poor performance of stocks besides much lower revenues than anticipated for all banks due to lower borrowing by both consumers and businesses.

Meanwhile, private sector banks are poor performers but not as bad as Govt sector banks since their loan losses are not as high, they are just in better shape if looking one year hence.

Stock price of SBI attached below. It has declined from INR 3,489 in Nov 10 to INR 1,770 today, Oct 4, 11, a decline of 50% in 11 months!

Stay tuned...

BN 10/04 08:42 State Bank of India Falls to Lowest in Two Years on Downgrade
BFW 10/04 07:19 State Bank of India Stand-Alone Rating Downgraded by Moody's
BN 10/04 07:16 *MOODY'S DOWNGRADES STAND-ALONE RATING OF STATE BANK OF INDIA

Moody's Downgrades Standalone Rating of State Bank of India
2011-10-04 07:25:17.949 GMT

By Pradeep Kurup
    Oct. 4 (Bloomberg) -- Moody's Investors Service downgraded
State Bank of India's bank financial strength rating, or
standalone rating, to 'D+' from 'C-', according to a statement
from the rating agency today. The revised rating maps to a
baseline credit assessment of 'Baa3', it said.
    The hybrid debt rating of the Indian state-run lender was
cut to 'Ba3(hyb)' from 'Ba2(hyb)', the statement said. The
revised bank rating carries a stable outlook and the hybrid
rating a negative outlook.