In the banking industry, profitability is an accountants opinion. The figure stated is an illusion. And the valuations that these banks don’t reflect any kind of sanity.
The receivables will at most be collected and the payables have to be paid. Worse case is that you will never get your receivables because of bad debts. There is no standard way to provide for bad debts and there is no way to predict events like the Iran war.
Banks cannot be valued at more than 2x of book value, no matter how good the bank. Any bank valued at more than 1.5x of book value should be declared to be a scam stock. When people borrow money, at most they repay it. They don’t pay back 5x. That happens on dob
In the end, the banks have really no skin in the game. Yet thanks to regulators, they get to keep everyone’s money. Pretty much without any responsibility or accountability. It is an industry with 100% corruption. And it is not if but when a private bank will sink. In the end all banks and all humans are dead. If you walk down Chandni Chowk in Delhi or the port area in Mumbai, you will see establishments that are hundreds of years old.
But you will not see a bank that is even two hundred years old.
The money lender and the tax collector have been the two most hated men since biblical times. Both took away your hard earned money. Switzerland has hundreds of banks. Collectively they stand for trust. Individually they are post boxes. You can buy a SaaS package for usd 5000 pa and become a bank.
There is something very very fishy about the largest banks in the world. They claim to have phenomenal research ability but finally park their own money with Bernie Sandoff.
The ONLY safeguard against these banks blowing up with your money is for the regulator to limit their size. But the Indian Banks deal with public funds. They just keep it in trust. The money doesn’t belong to them yet they deal with it as if it did.
The three banks – hdfc, icici and axis / Citibank have the same shareholders. They are supposedly board run, professionally managed, priority sector lending regulations compliant. The RBI oversees their banking operations. They d
But they resort to regulatory arbitrage. So all of them have insurance arms which are regulated by iRDA – the insurance regulator. Once banks have the money of their customers – it doesn’t take much to move them to insurance. This helps break all fiduciary controls.
Then all of them have securities and capital market operations. These are regulated by SEBI. Here the banks run Demat accounts and provide wealth management and investment banking.
The end result is that the three high risk banks control Rs 100+ lac crores of public funds. And they declare a profit of less than Rs one lac crore. And pay only Rs 16,000 cr of taxes.
End result is that a poor farmer pays 57% interest whilst a Gurgaon resident can find a Mercedes at 5.7%.
If these banks are not broken up quickly, it won’t go to good places.
