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2014-10-08 17:38:00
US Home Construction
US
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2014-09-24 22:12:00
Total Debt in the United States
US
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2014-09-24 00:00:00Gabriel Paulot
China and India: a small comparison
Many time we like to compare China and India as these 2 countries, due to the size of their population (more than a billion each) are expected to be the major economies in a reasonably near future.

Below tables displays few numbers that shows where the 2 countries stand today versus each other.
In short, India is currently about at the level that China was 10 years ago.

From this and from the growth achieved by China over the period 2003 - 2013 we can expect India to expand at a very steady pace over the coming decade.
As a matter of fact, after a lower growth in 2013 Indian economy has started to accelerate from the end of 2013.

Comparison
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2014-09-17 00:00:00Gabriel Paulot
Family Income in the US: 40 years of growing disparitiesFrançais
Here are some figures on the evolution of the average American household income by quintiles of income.

While all categories saw their income grow from the mid- 60s to mid-70s (the series starts in 1966) it did show a steady increase in inequality for almost 40 years, which the 2008 crisis has amplified.

Since 1976, the two lowest quintiles, which accounts for 40% of households, have seen their incomes stagnate (-0.2 % per annum for the lower quintile, and + 0.2 % per annum for the second quintile). The 3rd and 4th quintiles have known some growth but at a very moderate pace - below 1 % - (+ 0.4 % per annum and + 0.7 % per annum respectively). Only the top quintile has seen significant growth (+1.3 % per annum), driven by the top 5% (+ 1.8 % per annum).

This disparity between revenue growths concentrated in the highest income (top quintile and even more top 5%) poses a serious threat to the ongoing recovery with an imbalance between strengthened saving and investment capacities and an overall compressed household demand.

The record levels reached by the American financial markets in a context of moderate recovery, which still stumbles over a sluggish demand, also reflect this contradiction.

The numbers presented in below tables and graphs come from the US census bureau.

United States Family Mean Income
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2014-09-05 00:00:00Gabriel Paulot
Why to invest in private Indian banks?
Indian banks, especially private ones, are expanding fast their network on their domestic markets. The results is not only retail networks that place Indian bank among the largest in the world, but also an impressive growth of their revenue and profits.

Over the past 10 years Indian banks (based on 23 banks including in our analysis) have increased their revenue as well as their profits at an annual rate of +14% in US dollar term (+18% per annum in Indian rupees).

The growth registered by private banks which have been liberalized in 1993 is even more impressive. Private banks have increased their revenue over last 10 years, in US dollar term, at an annual rate of +19% and their profit by +24% (+24% and +29% respectively in Indian rupees).

Where do they stand today?

Before we start analyzing the development of Indian banks let's see where these firms stand relatively to some of their peer in the world.
 LaborForceParticipationAndUnemploymentRate
The largest Indian bank in term of number of branches is the state owned State Bank of India (SBI). SBI is the second largest retail bank in the world in term of number of branches with 15,869 branches as of March 2014, after the Chinese bank ICBC (17,574 branches in December 2013). It is the also one of the 3 largest Indian banks in term of Market Cap (USD 31 billion as of September 3rd, 2014) and the largest in term of net profit (USD 2.2 billion during the year 2013/14).

The largest Indian private banks in term of number of branches are ICICI (3,753 branches) and HDFC (3,403 branches). HDFC was also the largest bank in term of Market Cap on September 3rd, 2014 (USD 34 billion) and ICICI the 3rd one (USD 30 billion). ICICI was second for profit, after SBI, in 2013/14 (USD 1.7 billion) and ahead of HDFC (USD 1.4 billion).

As a comparison, the Chinese bank ICBC realized a profit of USD 42.4 billion in 2013, HSBC (United Kingdom) 25.4 or Wells Farco (United States) 20.9. The Brazilian bank Ita Unibanco realized a profit of USD 7.6 billion.

A bit more than 40 banks are listed on Indian stock markets (BSE and NSE). Their combined market capitalization is slightly below USD 200 billions a level reached by Wells Fargo alone (USD 268 billion), HSBC (USD 206 billion) or ICBC (USD 198 billion).
Indeed, the leading Indian banks have a market cap of around USD 30 billion a level that ranks them slightly beyond the 50th rank globally.

The reason behind this lies in 2 factors:
Indian banking system is still underdeveloped with an average income per capita among the lowest in the world.
International expansion of Indian banks has been so far marginal.
As a first conclusion, Indian banks have developed significant retail networks among the largest in the world which is yet to be fully reflected in term of profit and market capitalization.

 LaborForceParticipationAndUnemploymentRate

 LaborForceParticipationAndUnemploymentRate

Growth story

In term of growth the rapid expansion of their retail networks in getting reflected in their growth level. However we need to make the difference between:
State owned banks with large networks but lower level of growth and profitability
Private banks are expanding fast since mid 1990s - post liberation of the sector in 1993.

The graphs below reflects the average profit after Tax (PAT) by branches over the last 5 years. This shows that private banks displays a much higher level for a part explained by the difference of location and therefore clientele.

 LaborForceParticipationAndUnemploymentRate

In this ranking, the 6 highest performers are all private banks. They are also the one currently expanding their retail network at the fastest pace. We will now focus on private banks banks.

The 2 graphs below show the evolution of retail network and profit after tax (PAT) per branches over previous 10 years.

 LaborForceParticipationAndUnemploymentRate

 LaborForceParticipationAndUnemploymentRate

On average India private banks generated about 300,000 USD profit per branch, a level that has increased by +6% per annum over the last 10 years (+10% per annum in rupees).

If these private banks manage to continue expanding their retail networks, which is likely owing to the size of their domestic market, they will also see a growth in revenue and profit at a much stronger pace than most of their peers in the world.

Companies included in this report:
Axis Bank
Bank of Baroda
Bank Of India
Canara Bank
City Union Bank
DCB Bank
Dena Bank
Dhanlaxmi
Federal Bank
HDFC Bank
ICICI Bank
IDBI Bank
IndusInd Bank
ING Vysya Bank
Jammu and Kashmir Bank
Karnataka Bank
Karur Vysya Bank
Kotak Mahindra Bank
Punjab National Bank (PNB)
South Indian Bank
State Bank of India (SBI)
Union Bank of India
Yes Bank

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