How Indian investment banks and brokerage firms performed on stock market during financial crisis

Amid the stock market crash lets look at how the Indian investment and brokerage firms fared. Below is the list of main companies in this category along with their one year high and low prices. The Price column shown the current market price (as on 17 January 2009).

	52Week High	52Week Low	Price
Apollo Sindhoori	77	25	52
Centrum Capital	1,839	722	1,625
Edelweiss Capital	1,508	234	239
Emkay Global	401	24	32
Future Capital	1,190	125	157
Geojit Fin Serv	132	20	24
IL & FS Investmart	227	58	65
India Infoline	344	34	46
Indiabulls Securities	300	17	19
JM Financial	137	17	21
Motilal Oswal	379	48	63
Religare Enterprises Limited	650	275	321

The table below shows an estimate of variation between their year high and low prices. We have presented the percentage of fall in share price occurring when the prices fell from year high to reach the year low price.

	Variation
Religare Enterprises Limited	-58%
Centrum Capital	-61%
Apollo Sindhoori	-68%
IL & FS Investmart	-74%
Edelweiss Capital	-84%
Geojit Fin Serv	-85%
Motilal Oswal	-87%
JM Financial	-88%
Future Capital	-89%
India Infoline	-90%
Emkay Global	-94%
Indiabulls Securities	-94%

Finally, lets look at how much these stocks have fallen from their highs to current levels and what percentage have they risen from their

	Fall from highs	Rise from lows
Centrum Capital	-12%	125%
Apollo Sindhoori	-32%	108%
Religare Enterprises Limited	-51%	17%
IL & FS Investmart	-71%	12%
Geojit Fin Serv	-82%	20%
Motilal Oswal	-83%	31%
Edelweiss Capital	-84%	2%
JM Financial	-85%	24%
India Infoline	-87%	35%
Future Capital	-87%	26%
Emkay Global	-92%	33%
Indiabulls Securities	-94%	12%

With an exception of Centrum Capital and Apollo the entire sector has seen huge decline in its market value. Most of the stocks have fallen by more than 80% from their year highs.

Performance of Indian investment banks and brokerage firms

This article in continuation to the previous post on Top Investment banks, brokerage companies of India. Here we have looked at few fundamentals of these companies mainly their revenues and profits. It should be noted that the comparison is not perfect because many of these firms have multiple business whereas others are just into investment banking or brokerage. In terms of ttm (trailing twelve months) revenues the standings are:

	Mkt Cap.	Sales
India Infoline	13.1	7.95
Indiabulls Securities	4.8	6.26
Edelweiss Capital	17.9	2.29
Geojit Fin Serv	4.9	1.79
Emkay Global	0.8	1.34
Apollo Sindhoori	2.9	1.14
Future Capital	9.9	1.00
Motilal Oswal	9.0	0.72
JM Financial	15.8	0.52
Centrum Capital	11.1	0.46
IL & FS Investmart	4.6	0.31
Religare Enterprises Limited	24.5	0.29

The table below shows the same companies in order of their ttm earnings.

	Sales	Profit	Margin
Indiabulls Securities	6.26	2.23	36%
India Infoline	7.95	1.85	23%
Motilal Oswal	0.72	0.44	60%
Edelweiss Capital	2.29	0.26	11%
Geojit Fin Serv	1.79	0.25	14%
JM Financial	0.52	0.25	48%
Apollo Sindhoori	1.14	0.15	13%
Emkay Global	1.34	0.13	10%
Centrum Capital	0.46	0.12	27%
IL & FS Investmart	0.31	0.07	23%
Religare Enterprises Limited	0.29	-0.05	-16%
Future Capital	1.00	-0.06	-6%

In comparison to their market value how these company fare is shown below.

	Price	EPS Rs.	P/E
Indiabulls Securities	19	8.8	2.2
India Infoline	46	6.5	7.1
Motilal Oswal	63	3.1	20.5
Edelweiss Capital	239	3.4	69.8
Geojit Fin Serv	24	1.2	19.8
JM Financial	21	0.3	0.0
Apollo Sindhoori	52	2.7	19.1
Emkay Global	32	5.5	5.8
Centrum Capital	1,625	17.9	91.1
IL & FS Investmart	65	1.0	62.7
Religare Enterprises Limited	321	loss
Future Capital	157	loss

It is interesting to note that the highest valued firm in this category, Religare, has the least revenues of them and has reported loss in last quarter. However, being promoted by a well established group it is expected to grow fast and gain market share. This may be one reason why it is trading at high multiples.

AIG and Morgan Stanley declare their mortgage write-downs

AIG declared an after tax write-down hitting its bottom line by $2.7 billion and for Morgan Stanley this figure was $2.5 billion.

Morgan Stanley, the second biggest US securities firm after Goldman Sachs, has reportedly written down $3.7 billion in the first two months of its fourth quarter. More than $40 billion dollars have been written down so far by major banks and this figure is expected to escalate to $70 billion.

American International Group (AIG), world's largest insurance agency, had reported a 27% decline in earnings to $3.09 billion against $4.22 billion in the same quarter last year. AIG has insured some players against their mortgage related risks.

Morgan may follow Citi & Merrill in writedowns

According to Fox-Pitt Kelton analyst Morgan Stanley may have to writedown $6b in ABS, CDO, and other assets. Morgan Stanley is second largest securities firm of US followed by Merrill Lynch, which had already writtendown $8.4b in subprime mortgages. Goldman Sachs, the biggest securities firm of US, is an exception to the sub-prime crisis as it claimed to be short on CDOs during the advent of the crisis.

Over the past three days Morgan Stanley's shares have declined by more than 17%. CNBC had reported than Morgan Stanley may write down $3b in fourth quarter.

According to an estimate Morgan Stanley has an exposure of $22b in ABS and CDOs.

Prince resigns as Citi struggles

Charles Prince, CEO of US biggest bank Citi, resigned from his position as chairman and CEO on Sunday taking the responsibility for the business. He has been CEO of Citigroup for past four years. He has been replaced by Sir Win Bischof as interim CEO and Robert Rubin as chairman of Citi.

Managing an organization of the size of Citi is a very challenging task and Mr. Prince had worked hard to bring all the units of Citi under one umbrella. In the recent past Citigroup has done many mergers and acquisitions. In 1998 it has acquired of Salomon Inc., the successor of Salomon Brothers, the Investment bank which started the Mortgage Based Security (MBO).

Owing to the subprime crisis the rating agencies have downgraded many Collateralized Debt Obligations (CDO) and their mortgage securities. Because of this the valuations of these CDOs have fallen significantly and has impacted almost all banks which had exposure to mortgage based securities. In continuation to its earlier writedowns Citigroup Inc. has recently announced that its sub-prime writedowns may increase further to about $8b - $11b. Citi's total assets are about $2.3 trillion and is the world's largest bank by assets. Citi owns about $55b of subprime mortgage.

According to an estimate the total subprime mortgage based securities outstanding may be more than a trillion dollars.

About Citi:
200 million customer
100 countries
Domain: Consumer banking and credit, Investment banking, Securities brokerage, and Wealth management
Major Brands: Citibank, CitiFinancial, Primerica, Smith Barney, & Banamex

Merrill Lynch posts record losses in 93 years

The largest US brokerage Merrill Lynch had suffered worst quarter since its inception year 1914. The write-downs across CDOs and U.S. subprime mortgages were close to $7.9 billion. Earlier it had reported that this to be close to $4.5 billion. The net loss for the third quarter was $2.24 billion. Merrill's chief executive Stan O' Neal is under heavy pressure from board of directors over the handling of the crisis and is likely to resign.

This loss has made Merrill Lynch the biggest setback of the sub-prime crisis. Its losses were more than the combined losses of the rest of the US brokerage. Earlier Bear Stearns had to close two of its hedge funds and suffer $1.5 billion loss.

Merrill Lynch's reported a total net revenues of $577 million in the third quarter of 2007 which was down 94 percent from $9664 million in the second quarter of 2007 and $9833 million in the third quarter of 2006.

"Mortgage and leveraged finance-related write-downs in our FICC business depressed our financial performance for the quarter. In light of difficult credit markets and additional analysis by management during our quarter-end closing process, we re-examined our remaining CDO positions with more conservative assumptions. The result is a larger write-down of these assets than initially anticipated," said Stan O'Neal, chairman and chief executive officer. "We expect market conditions for subprime mortgage-related assets to continue to be uncertain and we are working to resolve the remaining impact from our positions," Mr. O'Neal continued. "Away from the mortgage-related areas, we continue to believe that secular trends in the global economy are favorable and that our businesses can perform well, as they have all year."

Source :Merrill Lynch Press Release