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Wednesday, April 11, 2018

Interesting Readings 11-Apr-2018


Ila Patnaik believes bank fraud at PNB and ICICI Bank (possibly) are result of lack of proper supervision. I agree that supervision is inadequate. However putting the blame on RBI alone is not proper. Rightly, Ila points at all supervisors. In addition, I think one perspective is missing - that PNB and ICICI Bank (alleged) fraud are two different animals. PNB is systemic loopholes being exposed something regulator, management should have caught and has far reaching implication wrt Business process design within banks. ICICI Bank (alleged) is pure corruption. Even if it is conclusively proved that there was no fraud, the optics on this are bad. It is more responsibility of shareholders than the other. 

Shikha Sharma followed K V Kamath's model of growth without regard to Asset quality. Even Rana Kapoor belongs to this group. On the liability side their strategy is to get corporate deposits. Aggressive lending - generally large corporate (longer tenure) and consumer lending (higher risks) on asset side and corporate deposits (more fickle, higher costs) on liability side accentuates Asset Liability mismatch for these banks. Chanda Kochhar managed to set ICICI house in order after Kamath's high-paced up-scaling. But the problem persists in many new private banks. As corporate lending portfolio looks more risky the banks become more shaky.

International
Grantham is one astute market observer. Earlier this year he mentioned the likelihood of a melt-up (markets going up). The Trump histrionics have dented the probabilities but it still is at 40%. Cool!

Interesting ideas from Fred Wilson. Short video, short podcast, IPO intro-letter. 

Frauds are eating up the moral character these days.

Interesting

Ken Rogoff thinks it is not easy.


On a different note
The story of the spy. Looks like a must watch movie from Meghana Gulzar. Talvar was well made movie. I liked it.

I like Dwayne Johnson.