Fall of Big Corporations Shares Prices and Effects on the Existence of Banking Industry.

 

15^th June 2021

Fall of Big Corporations Shares Prices and Effects on the Existence of Banking Industry.

Dear Fellow Travelers,

Namaste! On 12^th April 2019, we wrote our most-read post so far (1.5 lakhs hit) on the Indian Banking industry. At that time JET went bankrupt and SBI took over it. LIC took over IDBI bank. Mutual Funds debt schemes lost tons of money and they promised their holders to pay the money as and when they are able to liquidate their money. The post is still there on our Blog.

Is Indian Banking System heading for Liquidity Cri... https://bestofhiteshparikh.blogspot.com/2019/04/is-indian-banking-system-heading-for.html?spref=tw…

7:03 AM · Apr 12, 2019·

I want to share some of the facts on BANKING INDUSTRY as on today.

1.   Buffett has reduced his banking and financial companies’ exposure from 61% in 2019 to 23.6% as per current holding details. He sold banking stocks and moved to other areas. He has invested just a token of USD 500 million in NUBANK of Brazil. This is Digital Bank. He also holds some investments in Paytm.

2.   Buffet had experienced what had happened in the USA in 2008. He had made good money by investing in Goldman Sach at that time. In fact, you name the bank and he had tons of shares of that bank till 2019.

 

What could be the REASONS for Buffett Shift?

1.   Losses of the corporations are mounting with the change in technology / the business practices / Lockdown: -

 

We have seen what happened to JET / IDBI Bank and many other companies have gone to NCLT. Recent example is DHFL. Banks had to receive close to Rs.1 lakh crore and Piramal paid about Rs.37000 Crs. DHFL shares were traded around Rs.650 when the scam was announced. Today it is delisted. Now, if the promoters had pledged the shares at a 50% margin – taking a loan of Rs.325 per share at that time – banks have lost the money plus interest.

Technically, banks do not lose their own money. They lose the money of DEPOSITORS.

Today ADANI and AMBANI are considered AAA companies. The same way ANIL AMBANI companies also used to enjoy AAA ratings in the past. Now, they are struggling to remove the tag of WILLFUL Defaulter from SBI. If something bad happens to the above two groups – the existence of the banking industry will be at stake.

In the USA major corporation are suffering due to FAANG companies. 

2.   Competition to the BANKS: -

Digital banks are coming up. They will take away the shares of the BRICK and MORTAR banks over a period of time. This could be the reason BUFFETT would have invested a token amount in NUBANK and Paytm.

3.   Bitcoin and other Cryptocurrencies: -

Today we have tons of crypto-currencies and they are running as an unofficial banking system. Many companies like TESLA have announced that they will take payments in Cryptos. Now, if you use Cryptos – you will not use currencies. So, you will not keep money in the BANKS – it means banks will lose the opportunity to earn interest income on your deposits.

Just to give you perspective say somebody buys a single BITCOIN. The current price is around Rs.29 lakhs. If he was not holding this BITCOIN, he would have kept this money into BANKS. Assume he has kept an FD of Rs.29 lakhs in banks paying him 5.5% yearly interest. The bank is using this money to lend at say 9%. Bank is making 3.5% of its money. Thanks to BITCOIN, the banks lost that opportunity.

Over a period of time, country-specific CRYPTOS will come. Banks will also have their CRYPTO division but the normal business is gone forever. It means the VALUATIONS in the banks will suffer going forward (Not tomorrow).  

4.   Other Digital Payment Options: -

Apart from this, there is N number of other options are coming up like G-pay / Jio Pay / Airtel Pay. Paytm has direct tie-ups with vendors while these guys rely on UPI platforms.

To the extent you are using this – you are not using a debit card/cheque or cash. It means banks are losing on the opportunity to earn from you.

What was our call on Business changes?

On 26^th January 2020 this post - What Shani Sankranti Horoscope indicates about the coming 30 months for Market/Economy / World & Normal Persons at large?

In the same, we had categorically said the following.

House: - Saturn is in the 10^th house as per the CHART. It will become violent in the area of business. It means – All old ways of working / old ways of doing business will have to find new ways of working and new ways of business models. Some new businesses/technologies will come up. Established players will have a tough time in maintaining their leadership – if they are not ready to embrace the change.

Can you see the current situations and 100% ACCURACY of our above-mentioned call? We always keep you way ahead of the events. We had warned before this also. Buffett also changed his portfolio after this.

If the Third wave hits India as predicted between October 2021 to April 2022, banks will get more negative effects and their NPA will hit the roof.

This post is about the existence of the BANKING industry going forward and not about the Share prices of banking companies.

What NEXT?

Those who have kept their money in BANKS assuming their money is 100% safe, should give a second thought and plan better avenues for investing their savings.

If you want ACCURATE guidance in investing or personal issues, please contact us.

Have a HAPPY INVESTING.

Follow me on Twitter @hiteshmparikh or on Whatsapp - +91-9869425399.

Live With Passion…Invest With Passion.

Hitesh Parikh.