Banking Crisis on the Way..?

Is this the beginning of another crisis in the Banking history..? The Bank of America reported a whooping $ 1.79 billion loss for the quarter ending December 2008. The Citigroup posted a loss of $18.7 billion in 2008,$ 8.3 billion in the last quarter itself this too after receiving $45 billion as Government handouts. Merrill Lynch also reported $16 billion in write-offs. Bank of America has run into losses after 17 years, this shows that the worse is yet to come.

The new fears over the health of the banking sector were also made visible by German giant Deutsche Bank which disclosed that it made a loss of more than $6bn in the final three months of last year. An analyst at Morgan Stanley predicted HSBC may need to raise up to $30bn in a rights issue. That means it has to literally beg for cash in the already cashless market. Citigroup also split itself into two- core and non core banking. This could be a possible sign of Mr.Vikram Pandit's failing attempts to rebuild its capital base. I wont be suprised if Citi Holdings runs out of cash and declares bankruptcy if Mr.Pandit does not sell it off.

Back in India, Standard Chartered Bank, India's largest foreign bank also ran into losses due to its consumer finance business. This made Stanchart to close down its consumer finance business in India. The reason-rising defaults. HDFC bank also seems in a bit of trouble. According to Emkay research, the bank's gross NPAs increased to Rs19.1bn (1.9%)as compared with Rs16.8bn (1.6%) in Q2FY09. These are not encouraging signs. The health of ICICI bank has also come under scanner. Many analyst predict that ICICI may soon reclare bankruptcy. The shares of ICICI are traded at Rs.424 much less than HDFC which stood at Rs.937, SBI which was higher as expected at Rs.1165. But the top brass of the company insist that there is nothing to worry about. Its also a known fact that ICICI has the highest amount of NPA. On the other hand, all Public sector banks are doing well. Infy has also parked its money to PSU banks from ICICI. It is also reported that many other organizations have closed its accounts with ICICI, which is considered the most unethical of all the private banks. But it also remains the fact that ICICI was the bank which brought banking revolution in India with its technology and wide range of services.

Where is the banking sector heading..? World over, banks are showing their employees the exit door because of rising costs and credit scarcity. The umemployment rate is a good indicator of the economy's health. But more important is the health of the Banking sector which are the veins of any country. What would be the future of the banking sector? Would the Goverenment roll out a bailout plan if the fall of ICICI seems certain..? Will the Banking sector crash or will it be a see saw ride..? Only time will tell...!