New York City, New York -- The financial crisis of 2009 has resulted in regulators across the globe implementing new measures to strengthen banks’ balance sheets and avert a similar crisis in the future. The new regulations are not only expected to have an effect on major global banks but also foreign regional banks such as Puerto Rico-based Popular Inc. (NASDAQ: BPOP), and India-based ICICI Bank Limited (NYSE: IBN).
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The financial industry is undergoing a major overhaul as regulators across the world implement new measures to avert a future financial crisis. Banks across the world are under pressure to boost their capital rations and strengthen their balance sheets. Earlier this year, banks were relieved after the Basel Committee delayed the implementation of new liquidity rules by four years. The delay has given banks more time to shore up their balance sheets and improve their liquidity. Although several banks in emerging markets, especially Asia, need to improve their liquidity, they were particularly concerned as the new rules would have led to a slowdown in lending activity, which would have negatively impacted economic growth.
The need to boost capital ratios has prompted banks to sell assets. Earlier this month, Popular Inc. announced that its principal banking subsidiary, Banco Popular de Puerto Rico entered into a definitive agreement to sell $568 million of non-performing loans and other real estate owned. Richard Carrion, Chairman and CEO of Popular Inc., said that the transaction will significantly de-risk the bank’s balance sheet and improve future profitability. Carrion further said that the bank agreed to sell a substantial portion of its NPAs, and as a result, it expects significant reductions in credit-related expenses going forward. He added that the bank has significantly improved its credit risk profile and is better positioned to manage capital more efficiently. Our free research report onPopular Inc.can be downloaded upon registration at
Banks in developed world are grappling with a low interest rate environment. Central banks across the developed world are determined to boost economic growth through ultra-loose monetary policies. The Federal Reserve has kept U.S.’s benchmark interest rates at record low levels since the financial crisis, while the European Central Bank (ECB) has also cut euro zone’s benchmark interest rates to record low levels. While record low interest rates have boosted lending activity, they are putting pressure on banks’ net interest margin.
However, the scenario in emerging markets is completely different. While boosting economic growth and fighting deflation is the main focus of developed world central bank, in emerging markets such as India central banks have been fighting inflation. This has meant high interest rates in most emerging markets, which has boosted banks’ interest income. However, this has also meant that banks are seeing a slowdown in lending activity.
Back in January, ICICI Bank Limited reported its financial results for the third quarter ended December 31, 2012. The bank’s consolidated return on equity for the quarter was 15.7%. The bank reported a 22% increase in consolidated profit after tax for the quarter.ICICI Bank Ltd.free research is available today at
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