The recently released Fortune Magazine list of the most powerful women in US Business shows Kraft Foods boss Irene Rosenfeld claiming the top spot by pushing PepsiCo Inc chief Indra Nooyi to second spot. Oprah Winfrey, who was at No. 6 spot in 2010 sank to No. 16 this year. While women represent about half of the United States’ white-collar workers, they are a rarity in the upper echelons of business, with female chief executives running just 3 percent of companies in the Standard & Poor’s 500 index.
Irene Rosenfeld -Rank 1
Chairman and CEO
Kraft Foods
The 58-year old was ranked number 2 in 2010
Kraft chief executive, who led a hostile $18-billion takeover of Britain’s Cadbury last year, has been defined by Fortune as a person who "made a big show of power this year with her decision to split Kraft into two companies." Her new role hasn’t been decided but she plans to remain CEO until the deal’s expected close in 2012.
Indira Nooyi--Rank 2
CEO and chairman
PepsiCo
The 55-year-old was ranked 1 in 2010
Nooyi, the only woman to appear in the top 10 most powerful as well as the top 10 highest paid list, slipped to the second spot of the first category. Fortune Magazine noted that "Nooyi has been criticized for taking her eye off the core North American soda business, which has lost share to Coke." It, however, says that "PepsiCo has forged further into nutrition-focused products, a business that the company is trying to grow to $30 billion in 2020 from about $10 billion in 2010," under Nooyi's watch.
Here is the list of Fortune's Top 10 most powerful women for the year 2011:
1. Irene Rosenfeld
2. Indra Nooyi
3. Patricia Woertz
4. Ellen Kullman
5. Angela Braly
6. Andrea Jung
7. Ginni Rometty
8. Ursula Burns
9. Meg Whitman
10. Sherilyn McCoy
Wednesday, 5 October 2011
Tuesday, 4 October 2011
Moody's cuts Italy credit rating by three notches
NEW YORK/ROME (Reuters) - Moody's Investors Service cut Italy's bond ratings by three notches on Tuesday, saying it saw a "material increase" in funding risks for euro zone countries with high levels of debt.
Moody's downgraded Italy's ratings to A2 from Aa2, a lower rating than that of Estonia, and kept a negative outlook on the rating, a sign that further downgrades are possible within the next few years.
"The negative outlook reflects ongoing economic and financial risks in Italy and in the euro area," Moody's said in a statement.
"The uncertain market environment and the risk of further deterioration in investor sentiment could constrain the country's access to the public debt markets," it said.
Moody's also said that Italy's rating could "transition to substantially lower rating levels" if there were long-term uncertainty over the availability of external sources of liquidity support.
Italy's mix of chronically low growth, a huge public debt amounting to 120 percent of gross domestic product and a struggling government coalition has caused mounting alarm in financial markets.
The Moody's decision came as little surprise after the agency said on September 17 that it would finish a review for possible downgrade of its rating on Italy within a month.
"It's not that it was unexpected, but it doesn't help the situation at all," said Robbert Van Batenburg, Head of Equity Research, at Louis Capital in New York.
"They have already traded as if there was somewhat of a downgrade in the works, so it will probably force Italian policymakers to embark on more austerity programs. It will put another fiscal straitjacket on them," he said.
Moody's said the likelihood of a default by Italy was "remote," but the overall shift in sentiment on the euro area funding market implied a greater vulnerability to a loss of market access at affordable interest rates.
Italy's borrowing costs have soared over the past three months and have only been kept under control by the European Central Bank's purchase of its government bonds on secondary markets.
An auction of long-term bonds last month saw yields on 10 year BTPs rise to 5.86 percent, their highest level since the introduction of the euro more than a decade ago.
The center-right government of Prime Minister Silvio Berlusconi has been under heavy pressure over its handling of the escalating crisis and recently cut its growth forecasts through 2013.
It is now expecting the economy to expand by just 0.6 percent next year, down from a previous projection of 1.3 percent.
The government last month pushed through a 60 billion euro austerity package -- bringing forward by one year to 2013 a goal to balance its budget -- in return for support for its battered government bonds from the ECB.
SBI slips to 2-year low on Moody's downgrade
Shares of State Bank of India plunged over 4% after Moody's Investors Service downgraded the country's largest public sector bank's financial strength rating (BFSR), to D+ from C- on account of asset quality concerns and capital situation.
According to the note, the non-performing assets (NPA) are likely to continue rising in the near term and higher interest rates and a slower economy might weigh on the SBI's profitability and its creditworthiness.
The SBI reported a Tier 1 capital ratio of 7.60% as of 30 June 2011 which is below the 8% Tier 1 ratio that the government of India has committed for maintaining in public sector banks (PSB).
The level pushes the bank into a lower rating band which might provide an insufficient cushion to support growth and to absorb potentially higher credit costs from its deteriorating asset quality.
Further, Beatrice Woo, Moody's Vice President, said in the note, "Notwithstanding our expectations that SBI's capital ratios will soon be restored through a capital infusion by the government, SBI's efforts to secure this capital for the better part of the year demonstrates the bank's limited ability to manage its capital."
The Rs 230 billion rights issue that SBI is currently seeking would raise its Tier 1 ratio to approximately 9.30%. However, according to Moody's note, the capital deployed for loan growth, assuming 15% per annum for the next three fiscal years, will cause the Tier 1 ratio to fall below 8%, thereby necessitating another capital exercise.
Impact on stock price:
Shares of State Bank of India plunged over 4% to touch their 2-year low of Rs 1751.35 on the BSE. At 02:00 p.m., the company's shares were trading 4.8% lower at Rs 1773.
For the years the stock has slipped over 36%.
NPA's and Profitability:
The State Bank of India has a standalone business size of Rs 17 trillion. It enjoys a strong franchise and brand name in the country and has a market share of around 21%.
The bank's net profit has been under pressure for the past couple of quarters. For the first quarter ended June 2011, the net profit fell 45.7% to Rs 1,584 crore because of higher provisioning and a tax rate of 50%.
On the asset quality front, the bank's NPA, as of 30 June 2011, reached a 3-year high of 3.52% of loans and Rs 277,680 million on absolute basis.
According to the note, the non-performing assets (NPA) are likely to continue rising in the near term and higher interest rates and a slower economy might weigh on the SBI's profitability and its creditworthiness.
The SBI reported a Tier 1 capital ratio of 7.60% as of 30 June 2011 which is below the 8% Tier 1 ratio that the government of India has committed for maintaining in public sector banks (PSB).
The level pushes the bank into a lower rating band which might provide an insufficient cushion to support growth and to absorb potentially higher credit costs from its deteriorating asset quality.
Further, Beatrice Woo, Moody's Vice President, said in the note, "Notwithstanding our expectations that SBI's capital ratios will soon be restored through a capital infusion by the government, SBI's efforts to secure this capital for the better part of the year demonstrates the bank's limited ability to manage its capital."
The Rs 230 billion rights issue that SBI is currently seeking would raise its Tier 1 ratio to approximately 9.30%. However, according to Moody's note, the capital deployed for loan growth, assuming 15% per annum for the next three fiscal years, will cause the Tier 1 ratio to fall below 8%, thereby necessitating another capital exercise.
Impact on stock price:
Shares of State Bank of India plunged over 4% to touch their 2-year low of Rs 1751.35 on the BSE. At 02:00 p.m., the company's shares were trading 4.8% lower at Rs 1773.
For the years the stock has slipped over 36%.
NPA's and Profitability:
The State Bank of India has a standalone business size of Rs 17 trillion. It enjoys a strong franchise and brand name in the country and has a market share of around 21%.
The bank's net profit has been under pressure for the past couple of quarters. For the first quarter ended June 2011, the net profit fell 45.7% to Rs 1,584 crore because of higher provisioning and a tax rate of 50%.
On the asset quality front, the bank's NPA, as of 30 June 2011, reached a 3-year high of 3.52% of loans and Rs 277,680 million on absolute basis.
Why 5200 is a very important level on the chart...?
Above is a daily chart of Nifty. Here I want to show that why 5200 is a very important level for the Nifty. On chart I have shown retracement level from different tops which were made during the fall from 6336 to the bottom made in August at 5720.
5260 is a 33.3% retracement level from 6336 to 4720.
5208 is a 33.3% retracement level from 6178 to 4720.
5190 is a 38.2% retracement level from 6944 to 4720.
5208 is a 50.0% retracement level from 5702 to 4720.
All the levels above shown are around 5200.
This 5200 level has been working as a support and resistance for the Nifty in past also. It is seen in the chart that up and down arrows are working as a support and resistance respectively for Nifty.
In the month of September Nifty went to 5170 twice and from there it reversed. So, all this retracements levels and past support and resistance level confirms that 5200 is very much important for market and if it breaks above that level then Nifty can go higher levels.
What is Quantitaive Easing-QE
QUANTITATIVE EASING (Q.E.2)
The US Federal Reserve is desperately trying to fix the economic system that broke down in 2007. Incomes in the US were skewed in favor of the rich, while the poor while the poor got skewed. It relocated production to the emerging countries , where cost were very cheap, and it piled on debt to consumers by keeping interest rates low. Due to this consumer confidence lost and US economy now needs money so as to make people rich which will increase production and will give rise to inflation. Also it will increase employment. So let’s understand this process of printing more money which is termed as quantitative easing or Q.E.
Q.E- It is done by buying bonds usually government paper but can also be private bonds from banks and financial institutions. Till now Japan, Zimbabwe has done this during its asset bubble period. This helps in creating a wealth effect which spurs the economy. When a government prints money, interest rates drop and inflation rises. This is simply a matter of supply and demand: the same way that corn is cheap in the summer when it’s plentiful, the Fed is making it cheaper to borrow dollars, by flooding the market with them.
Q.E 1-On 25th Nov. 2008, the Fed announced QE1, a plan for buying $100 billion of agency debt and $500 billion mortgage-backed securities (MBS). The 10-year yield fell from 3.35% to 3.02% immediately. The dollar index fell and on March 2009 Fed purchased agency debt to $200 billion, MBS to $1.25 trillion and added another $300 billion of treasury securities to its purchase plan. The dollar fell to 74.7 at the end of Nov 2009. Asset, commodities prices moved up but it posed a threat to emerging countries as interest rates in US is zero so investors will invest their money in emerging countries which will pose a threat to these countries.
Q.E 2- On Aug. Fed announced another round of QE and this time they may print $900 billion and be completed by the end of the third quarter of 2011. The central bank will buy $600 billion in long-term Treasuries. The Fed also said that it will reinvest an additional $250 billion to $300 billion in Treasuries. The Fed wants a return of inflation in the US and in turn GDP expansion.
Implications-For the world economy as a whole, this system may set the stage for an even bigger crisis even if it succeeds. Devalue of dollar will take place. Already there is currency war between US and China which may increase. Asset prices will increase which will lead to over-valuation of markets. Emerging countries will need to cap on FII inflows into their country. Too much monetary stimulus might lead to runaway inflation that could derail the economy, or future asset bubbles that could endanger economic stability over the long term in US.
The US Federal Reserve is desperately trying to fix the economic system that broke down in 2007. Incomes in the US were skewed in favor of the rich, while the poor while the poor got skewed. It relocated production to the emerging countries , where cost were very cheap, and it piled on debt to consumers by keeping interest rates low. Due to this consumer confidence lost and US economy now needs money so as to make people rich which will increase production and will give rise to inflation. Also it will increase employment. So let’s understand this process of printing more money which is termed as quantitative easing or Q.E.
Q.E- It is done by buying bonds usually government paper but can also be private bonds from banks and financial institutions. Till now Japan, Zimbabwe has done this during its asset bubble period. This helps in creating a wealth effect which spurs the economy. When a government prints money, interest rates drop and inflation rises. This is simply a matter of supply and demand: the same way that corn is cheap in the summer when it’s plentiful, the Fed is making it cheaper to borrow dollars, by flooding the market with them.
Q.E 1-On 25th Nov. 2008, the Fed announced QE1, a plan for buying $100 billion of agency debt and $500 billion mortgage-backed securities (MBS). The 10-year yield fell from 3.35% to 3.02% immediately. The dollar index fell and on March 2009 Fed purchased agency debt to $200 billion, MBS to $1.25 trillion and added another $300 billion of treasury securities to its purchase plan. The dollar fell to 74.7 at the end of Nov 2009. Asset, commodities prices moved up but it posed a threat to emerging countries as interest rates in US is zero so investors will invest their money in emerging countries which will pose a threat to these countries.
Q.E 2- On Aug. Fed announced another round of QE and this time they may print $900 billion and be completed by the end of the third quarter of 2011. The central bank will buy $600 billion in long-term Treasuries. The Fed also said that it will reinvest an additional $250 billion to $300 billion in Treasuries. The Fed wants a return of inflation in the US and in turn GDP expansion.
Implications-For the world economy as a whole, this system may set the stage for an even bigger crisis even if it succeeds. Devalue of dollar will take place. Already there is currency war between US and China which may increase. Asset prices will increase which will lead to over-valuation of markets. Emerging countries will need to cap on FII inflows into their country. Too much monetary stimulus might lead to runaway inflation that could derail the economy, or future asset bubbles that could endanger economic stability over the long term in US.
Terminology used in Banking more
Tier 1 Capital
What Does Tier 1 Capital Mean?
A term used to describe the capital adequacy of a bank. Tier I capital is core capital, this includes equity capital and disclosed reserves. Equity capital includes instruments that can't be redeemed at the option of the holder.
Tier 2 Capital
What Does Tier 2 Capital Mean?
A term used to describe the capital adequacy of a bank. Tier II capital is secondary bank capital that includes items such as undisclosed reserves, general loss reserves, subordinated term debt, and more.
Tier 3 Capital
What Does Tier 3 Capital Mean?
Tertiary capital held by banks to meet part of their market risks, that includes a greater variety of debt than tier 1 and tier 2 capitals. Tier 3 capital debts may include a greater number of subordinated issues, undisclosed reserves and general loss reserves compared to tier 2 capital. To qualify as tier 3 capital, assets must be limited to 250% of a banks tier 1 capital, be unsecured, subordinated and have a minimum maturity of two years.
Capital Adequacy Ratio - CAR
What Does Capital Adequacy Ratio - CAR Mean?
A measure of a bank's capital. It is expressed as a percentage of a bank's risk weighted credit exposures. Also known as "Capital to Risk Weighted Assets Ratio (CRAR)." This ratio is used to protect depositors and promote the stability and efficiency of financial systems around the world.
Two types of capital are measured: tier one capital, which can absorb losses without a bank being required to cease trading, and tier two capital, which can absorb losses in the event of a winding-up and so provides a lesser degree of protection to depositors.
Basel I
What Does Basel I Mean?
A set of international banking regulations put forth by the Basel Committee on Bank Supervision, which set out the minimum capital requirements of financial institutions with the goal of minimizing credit risk. Banks that operate internationally are required to maintain a minimum amount (8%) of capital based on a percent of risk-weighted assets. The first accord was the Basel I. It was issued in 1988 and focused mainly on credit risk by creating a bank asset classification system. This classification system grouped a bank's assets into five risk categories:
0% - cash, central bank and government debt and any OECD government debt
0%, 10%, 20% or 50% - public sector debt
20% - development bank debt, OECD bank debt, OECD securities firm debt, non-OECD bank debt (under one year maturity) and non-OECD public sector debt, cash in collection
50% - residential mortgages
100% - private sector debt, non-OECD bank debt (maturity over a year), real estate, plant and equipment, capital instruments issued at other banks
The bank must maintain capital (Tier 1 and Tier 2) equal to at least 8% of its risk-weighted assets. For example, if a bank has risk-weighted assets of $100 million, it is required to maintain capital of at least $8 million.
Basel II
What Does Basel II Mean?
A set of banking regulations put forth by the Basel Committee on Bank Supervision, which regulates finance and banking internationally. Basel II attempts to integrate Basel capital standards with national regulations, by setting the minimum capital requirements of financial institutions with the goal of ensuring institution liquidity. Basel II is the second of the Basel Committee on Bank Supervision's recommendations, and unlike the first accord, Basel I, where focus was mainly on credit risk, the purpose of Basel II was to create standards and regulations on how much capital financial institutions must have put aside. Banks need to put aside capital to reduce the risks associated with its investing and lending practices.
Basel III
What Does Basel III Mean?
A comprehensive set of reform measures designed to improve the regulation, supervision and risk management within the banking sector. The Basel Committee on Banking Supervision published the first version of Basel III in late 2009, giving banks approximately three years to satisfy all requirements. Largely in response to the credit crisis, banks are required to maintain proper leverage ratios and meet certain capital requirements. Basel III is part of the continuous effort made by the Basel Committee on Banking Supervision to enhance the banking regulatory framework. It builds on the Basel I and Basel II documents, and seeks to improve the banking sector's ability to deal with financial and economic stress, improve risk management and strengthen the banks' transparency. A focus of Basel III is to foster greater resilience at the individual bank level in order to reduce the risk of system wide shocks.
Source: investopedia
What Does Tier 1 Capital Mean?
A term used to describe the capital adequacy of a bank. Tier I capital is core capital, this includes equity capital and disclosed reserves. Equity capital includes instruments that can't be redeemed at the option of the holder.
Tier 2 Capital
What Does Tier 2 Capital Mean?
A term used to describe the capital adequacy of a bank. Tier II capital is secondary bank capital that includes items such as undisclosed reserves, general loss reserves, subordinated term debt, and more.
Tier 3 Capital
What Does Tier 3 Capital Mean?
Tertiary capital held by banks to meet part of their market risks, that includes a greater variety of debt than tier 1 and tier 2 capitals. Tier 3 capital debts may include a greater number of subordinated issues, undisclosed reserves and general loss reserves compared to tier 2 capital. To qualify as tier 3 capital, assets must be limited to 250% of a banks tier 1 capital, be unsecured, subordinated and have a minimum maturity of two years.
Capital Adequacy Ratio - CAR
What Does Capital Adequacy Ratio - CAR Mean?
A measure of a bank's capital. It is expressed as a percentage of a bank's risk weighted credit exposures. Also known as "Capital to Risk Weighted Assets Ratio (CRAR)." This ratio is used to protect depositors and promote the stability and efficiency of financial systems around the world.
Two types of capital are measured: tier one capital, which can absorb losses without a bank being required to cease trading, and tier two capital, which can absorb losses in the event of a winding-up and so provides a lesser degree of protection to depositors.
Basel I
What Does Basel I Mean?
A set of international banking regulations put forth by the Basel Committee on Bank Supervision, which set out the minimum capital requirements of financial institutions with the goal of minimizing credit risk. Banks that operate internationally are required to maintain a minimum amount (8%) of capital based on a percent of risk-weighted assets. The first accord was the Basel I. It was issued in 1988 and focused mainly on credit risk by creating a bank asset classification system. This classification system grouped a bank's assets into five risk categories:
0% - cash, central bank and government debt and any OECD government debt
0%, 10%, 20% or 50% - public sector debt
20% - development bank debt, OECD bank debt, OECD securities firm debt, non-OECD bank debt (under one year maturity) and non-OECD public sector debt, cash in collection
50% - residential mortgages
100% - private sector debt, non-OECD bank debt (maturity over a year), real estate, plant and equipment, capital instruments issued at other banks
The bank must maintain capital (Tier 1 and Tier 2) equal to at least 8% of its risk-weighted assets. For example, if a bank has risk-weighted assets of $100 million, it is required to maintain capital of at least $8 million.
Basel II
What Does Basel II Mean?
A set of banking regulations put forth by the Basel Committee on Bank Supervision, which regulates finance and banking internationally. Basel II attempts to integrate Basel capital standards with national regulations, by setting the minimum capital requirements of financial institutions with the goal of ensuring institution liquidity. Basel II is the second of the Basel Committee on Bank Supervision's recommendations, and unlike the first accord, Basel I, where focus was mainly on credit risk, the purpose of Basel II was to create standards and regulations on how much capital financial institutions must have put aside. Banks need to put aside capital to reduce the risks associated with its investing and lending practices.
Basel III
What Does Basel III Mean?
A comprehensive set of reform measures designed to improve the regulation, supervision and risk management within the banking sector. The Basel Committee on Banking Supervision published the first version of Basel III in late 2009, giving banks approximately three years to satisfy all requirements. Largely in response to the credit crisis, banks are required to maintain proper leverage ratios and meet certain capital requirements. Basel III is part of the continuous effort made by the Basel Committee on Banking Supervision to enhance the banking regulatory framework. It builds on the Basel I and Basel II documents, and seeks to improve the banking sector's ability to deal with financial and economic stress, improve risk management and strengthen the banks' transparency. A focus of Basel III is to foster greater resilience at the individual bank level in order to reduce the risk of system wide shocks.
Source: investopedia
Bernanke: Fed Prepared to Take Action to Boost Growth
The Fed “will continue to closely monitor economic developments and is prepared to take further action as appropriate to promote a stronger economic recovery in a context of price stability,” Bernanke said today in testimony to Congress’s Joint Economic Committee in Washington.
The remarks signal Bernanke may not be finished after attempts in August and September to strengthen record monetary stimulus with unconventional tools. The central bank’s near-zero benchmark interest rate and $2.3 trillion of housing and government-debt purchases since 2008 have failed to produce self-sustaining growth in the economy and employment.
Lawmakers on the separate bipartisan congressional supercommittee charged with seeking $1.5 trillion in deficit reduction by Nov. 23 would take a “substantial step” by accomplishing that goal, Bernanke, 57, said in prepared remarks. At the same time, “more will be needed to achieve fiscal sustainability,” he said.
“A second important objective is to avoid fiscal actions that could impede the ongoing economic recovery,” Bernanke said. “Putting in place a credible plan for reducing future deficits over the longer term does not preclude attending to the implications of fiscal choices for the recovery in the near term,” he said, without being more specific.
The remarks signal Bernanke may not be finished after attempts in August and September to strengthen record monetary stimulus with unconventional tools. The central bank’s near-zero benchmark interest rate and $2.3 trillion of housing and government-debt purchases since 2008 have failed to produce self-sustaining growth in the economy and employment.
Lawmakers on the separate bipartisan congressional supercommittee charged with seeking $1.5 trillion in deficit reduction by Nov. 23 would take a “substantial step” by accomplishing that goal, Bernanke, 57, said in prepared remarks. At the same time, “more will be needed to achieve fiscal sustainability,” he said.
“A second important objective is to avoid fiscal actions that could impede the ongoing economic recovery,” Bernanke said. “Putting in place a credible plan for reducing future deficits over the longer term does not preclude attending to the implications of fiscal choices for the recovery in the near term,” he said, without being more specific.
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