This Bank deserves a separate thread. To start with here's a great interview with Aditya Puri sourced fron Mint:

Not yet put it up as yet. One thing fascinates me about Aditya Puri is if he can leave home at 5.30 and grow at 30% CAGR what kind of growth can they do if he is in office till 9.00pm!!!

Thats a very stirring thought: that HDFC Bank has never traded at such low valuations historically. But I'm controlling myself and staying put for now, I've been constantly putting money @ 1500, 1400, 1200 levels and now I think I'll invest only when there is enough fuel (pessimism - according to Kulman ji), waiting for HDFC Bank to come down to 1000. If it doesn't I'm happy to have made the lowest purchase at 1200.

After seeing this thread i did some lookup on why Warrent Buffet went about buying a stake in Wells Fargo.

Warren Buffett built a huge position in Wells between 1989-1990 when banking stocks were in the dumps due to

Here's Warren Buffet's notes:

"The banking business is no favorite of ours. When assets are twenty times equity - a common ratio in this industry - mistakes that involve only a small portion of assets can destroy a major portion of equity. And mistakes have been the rule rather than the exception at many major banks. Most have resulted from a managerial failing that we described last year when discussing the "institutional imperative:" the tendency of executives to mindlessly imitate the behavior of their peers, no matter how foolish it may be to do so. In their lending, many bankers played follow-the-leader with lemming-like zeal; now they are experiencing a lemming-like fate.

      Because leverage of 20:1 magnifies the effects of managerial strengths and weaknesses, we have no interest in purchasing shares of a poorly-managed bank at a "cheap" price. Instead, our only interest is in buying into well-managed banks at fair prices.

      With Wells Fargo, we think we have obtained the best managers in the business, Carl Reichardt and Paul Hazen. In many ways the combination of Carl and Paul reminds me of another - Tom Murphy and Dan Burke at Capital Cities/ABC. First, each pair is stronger than the sum of its parts because each partner understands, trusts and admires the other. Second, both managerial teams pay able people well, but abhor having a bigger head count than is needed. Third, both attack costs as vigorously when profits are at record levels as when they are under pressure. Finally, both stick with what they understand and let their abilities, not their egos, determine what they attempt. (Thomas J. Watson Sr. of IBM followed the same rule: "I'm no genius," he said. "I'm smart in spots - but I stay around those spots.")

      Our purchases of Wells Fargo in 1990 were helped by a chaotic market in bank stocks. The disarray was appropriate: Month by month the foolish loan decisions of once well-regarded banks were put on public display. As one huge loss after another was unveiled - often on the heels of managerial assurances that all was well - investors understandably concluded that no bank's numbers were to be trusted. Aided by their flight from bank stocks, we purchased our 10% interest in Wells Fargo for $290 million, less than five times after-tax earnings, and less than three times pre-tax earnings.

      Wells Fargo is big - it has $56 billion in assets - and has been earning more than 20% on equity and 1.25% on assets. Our purchase of one-tenth of the bank may be thought of as roughly equivalent to our buying 100% of a $5 billion bank with identical financial characteristics. But were we to make such a purchase, we would have to pay about twice the $290 million we paid for Wells Fargo. Moreover, that $5 billion bank, commanding a premium price, would present us with another problem: We would not be able to find a Carl Reichardt to run it. In recent years, Wells Fargo executives have been more avidly recruited than any others in the banking business; no one, however, has been able to hire the dean.

      Of course, ownership of a bank - or about any other business - is far from riskless. California banks face the specific risk of a major earthquake, which might wreak enough havoc on borrowers to in turn destroy the banks lending to them. A second risk is systemic - the possibility of a business contraction or financial panic so severe that it would endanger almost every highly-leveraged institution, no matter how intelligently run. Finally, the market's major fear of the moment is that West Coast real estate values will tumble because of overbuilding and deliver huge losses to banks that have financed the expansion. Because it is a leading real estate lender, Wells Fargo is thought to be particularly vulnerable.

      None of these eventualities can be ruled out. The probability of the first two occurring, however, is low and even a meaningful drop in real estate values is unlikely to cause major problems for well-managed institutions. Consider some mathematics: Wells Fargo currently earns well over $1 billion pre-tax annually after expensing more than $300 million for loan losses. If 10% of all $48 billion of the bank's loans - not just its real estate loans - were hit by problems in 1991, and these produced losses (including foregone interest) averaging 30% of principal, the company would roughly break even.

      A year like that - which we consider only a low-level possibility, not a likelihood - would not distress us. In fact, at Berkshire we would love to acquire businesses or invest in capital projects that produced no return for a year, but that could then be expected to earn 20% on growing equity. Nevertheless, fears of a California real estate disaster similar to that experienced in New England caused the price of Wells Fargo stock to fall almost 50% within a few months during 1990. Even though we had bought some shares at the prices prevailing before the fall, we welcomed the decline because it allowed us to pick up many more shares at the new, panic prices.

      Investors who expect to be ongoing buyers of investments throughout their lifetimes should adopt a similar attitude toward market fluctuations; instead many illogically become euphoric when stock prices rise and unhappy when they fall. They show no such confusion in their reaction to food prices: Knowing they are forever going to be buyers of food, they welcome falling prices and deplore price increases. (It's the seller of food who doesn't like declining prices.) Similarly, at the Buffalo News we would cheer lower prices for newsprint - even though it would mean marking down the value of the large inventory of newsprint we always keep on hand - because we know we are going to be perpetually buying the product.

      Identical reasoning guides our thinking about Berkshire's investments. We will be buying businesses - or small parts of businesses, called stocks - year in, year out as long as I live (and longer, if Berkshire's directors attend the seances I have scheduled). Given these intentions, declining prices for businesses benefit us, and rising prices hurt us.

      The most common cause of low prices is pessimism - some times pervasive, some times specific to a company or industry. We want to do business in such an environment, not because we like pessimism but because we like the prices it produces. It's optimism that is the enemy of the rational buyer.

      None of this means, however, that a business or stock is an intelligent purchase simply because it is unpopular; a contrarian approach is just as foolish as a follow-the-crowd strategy. What's required is thinking rather than polling. Unfortunately, Bertrand Russell's observation about life in general applies with unusual force in the financial world: "Most men would rather die than think. Many do."

Link to Warren Buffett's Letter:
http://www.berkshirehathaway.com/letters/1990.html - http://www.berkshirehathaway.com/letters/1990.html

Its Q4 total income increased by 47.01% to Rs 3505 crore from Rs 2384.19 crore.

CNBC broke that news a couple of news back but suely it is good that the uncertainity of these transactions are sorted out this quarter so that markets can look ahead.

BS reported that tirupur based textile exporters have rejected ICICI Bank's offer to help them instead they want the bank to take 75% of the hit of the total loosses.

HDFC Bank's provisioning for losses under loans up

Private sector lender HDFC Bank today said its provisioning for losses under loans has increased as the proportion of personal advances has gone up. Speaking at the annual general meeting here today, bank Chairman Jagdish Capoor said the proportion of personal loans given by the bank has increased and so the provision for the losses has also gone up , he said. "The possibility of NPAs in personal loans is higher but the interest rate charged on personal loans is also higher and the bank will get more yield on these loans," he said.

The bank, which has a balance sheet size of Rs 1,35,000 crore and growing its business at about 40 per cent year-on year, expects to keep the momentum going though the Capoor said he would not like to make a forward-looking statement. Responding to a query on possible growth by the bank this year, the chairman said, "Our past record can be looked at."

Capoor said the bank will be increasing its footprint as the it is expecting to get the Reserve Bank approval to open about 200 more branches in the current year. The bank, which has recently taken over the Centurian Bank of Punjab, has about 1,170 branches. It takes about 18 months for a new bank branch to break-even, he said.

Referring to a shareholders' query as to what the bank was planning to do to arrest the recent fall in its share price, he said the bank does not have any plans to take artificial measures like buyback of shares nor is it planning any bonus issue or split in the par value of the share.

Source: ET

Beelkool bhai sahab.Daag ke binaa kya hai.

It is tough to be plucking roses in a dark night.

Enjoy the fragrance; do not worry about the night!

Season for downward revision of earning estimates of banks has begun. Emkay indicates earnings and book value estimates for the banks for FY09 & FY10 revised downwards by 2-9% and 0.5-2.0% in view of RBI rate hikes & high bond yields. New estimates for private banks are given below:

                                    EPS09             BV09              EPS10             BV10

HDFC Bank                44.80               349.3               79.50               485.4

Axis                             39.6                 273.8               51.8                 322.1

Yes                              9.4                   63.8                 15.1                 75.8

ICICI                          46.4                 430.5               61.1                 479.6

"They are killing the Generals" in words of a famous Mutual funds Manager at the onset of bear market.

If you do a calculation of Price to adjusted book and PE ratio a year down the line things would not seem so scary. We need to apply fundamentals to what the markets are doing irrespective of whether our neighbour does it or not.

Without commenting on HDFC Bank, I feel HDFC could be in serious problem due to defaulters. Remember default arrives with a slow down gap. In India, slowdown (of economy not stock markets) has just started hence we can see something in next 10-15 months.