LIC, India?s largest insurer and one of the key investors in equities, has slowly & steadily increased its stake in various Indian banks. The insurance behemoth?s year-on-year holding in at least 13 banks as of March 31, 2010, was more compared with what they were in the year-ago period. On an overall basis, its portfolio is skewed in favour of PSU banks than that of private lenders.
The bullish stance seems to be in line with that of foreign institutional investors, or FIIs, who have also increased their stakes in these banks y-o-y. Interestingly, FII holdings in private sector banks, such as ICICI and HDFC Bank, is far more than that of LIC.
?We have been bullish on the sector for quite some time now, despite the ups and downs,? said Mohan Raj, executive director in charge of investments at LIC.
According to analysts, LIC had started buying heavily in banks after the Lehman crisis of September 2008, when bank scrips had corrected sharply and were available at rock-bottom valuations. Given the buoyant economic scenario at present, institutions are still finding the banking sector attractive. ?If the economy does well, banking has to do well,? said an analyst with a broking firm. He added that going forward, the improving operating environment will result in better Return on Assets (ROA) for banks. ROA is an indicator of how profitable a bank is relative to its total assets.
Among public sector banks, LIC has increased stakes in SBI, Syndicate Bank, Uco Bank, Indian Overseas Bank, Bank of India, Punjab National Bank, Canara Bank, Union Bank of India and IDBI Bank. Among private sector banks, it has hiked its stake in ICICI, Kotak Mahindra, Federal Bank and South Indian Bank.
LIC has upped its shareholding in India?s largest bank SBI by 2.2% to 11.8% in March 2010 from 9.5% in March 2009 . FIIs, on the other hand, have increased their holding in SBI to 10.1% from 7.9% over the same period. LIC?s stake hike is even more significant (7.6%) over a two-year period as the company?s stake in SBI at the end of March 2008 stood at 4.2%.
The bank has bought fresh stake in Kotak Mahindra Bank (1.12%). Other banks where LIC has upped its stake in excess of 1% y-o-y include Federal Bank (2.49%), Bank of India (2.16%), ICICI Bank (1.03%), Syndicate bank (1.6%), Uco Bank (1.21%), Indian Overseas Bank (1.2%), Punjab National Bank (1.44%), Canara Bank (1.32%). LIC has invested the most in SBI (Rs 15,614 crore), ICICI Bank (Rs 11,057 crore) and HDFC Bank (Rs 6,507 crore).
On the other hand, LIC has reduced its holdings in Allahabad Bank, HDFC Bank and Bank of Baroda by 1%, 0.15% and 0.31%, respectively. Its investment in Vijaya Bank and Corporation Bank remain unchanged. LIC holds 26.3% in Corporation Bank, its highest stakeholding in any bank.