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It was a long time coming, but Lloyds (LLOY) finally floated TSB (TSB) - or at least 35 per cent of it - last month. TSB, of course, is Lloyds' vehicle for hiving off the 631 branches demanded of it by the European Union competition regulators in 2009 as the price for state support during the financial crisis. Lloyds, however, has given birth to a robust new player, void of the legacy issues which continue to afflict other higher street banks, and which looks well placed to grow amid a recovering UK economy. Yet, crucially, TSB's shares trade below estimates of tangible book value, leaving them looking churlishly rated for the banking sector. The bank certainly won't suffer from the problems of inadequate scale usually associated with new entrants. It begins life with a branch network that accounts for 6 per cent of the UK's total bank branches and boasts 4.2 per cent of UK current accounts. Indeed, it's already the UK's seventh largest bank and has also been born with an enviably robust loan book. Not only has Lloyds provided the new lender with an indemnity, effectively protecting it from such issues as PPI-type compensation misery, but around three-quarters of TSB's book comprises mortgage loans. They're historically low risk, so the lender's asset quality should be good. Neither is TSB exposed to the vagaries of the interbank funding market: as at end-March, it had £23.3bn of cheap and stable customer deposits funding a total loan book of £23bn. With economic recovery now looking well entrenched - the International Monetary Fund expects the UK's economy to grow nearly 3 per cent this year - TSB should be able to grow solidly, too. Prospects for grabbing a greater share of the current account market look promising as 164 former Cheltenham & Gloucester branches, which only became capable of offering personal accounts a year ago, push into the market. Growing the mortgage book shouldn't prove overly challenging, either. After all, and amid a booming housing market, the Bank of England's second-quarter credit conditions survey reported that demand for mortgages had continued to increase significantly. TSB's efforts here should be helped once it reintroduces a mortgage intermediary sales function in early 2015, and analysts at broker BTIG expect the bank's loan book to grow 40-50 per cent by 2017. Moreover, with a Basel III basis core tier-one capital ratio (which compares equity-type capital to assets, weighted for risk) of 21.6 per cent, TSB doesn't lack the capital to support growth either. Indeed, that ratio leaves it as easily the best-capitalised of the larger UK banks. Being capital-rich, however, doesn't signal fat dividends. Management has made it clear that capital will be used to support growth in the near term and that a maiden dividend isn't anticipated until 2017. In time, however, management expects TSB to be able to support a payout that's equivalent to 40-60 per cent of underlying earnings. TSB won't start li

Recent data show that wholesale price inflation topped 6 per cent a year in May, up from 5.2 per cent in April; consumer prices rose by an annualised 8.3 per cent, against a central bank target of 8 per cent. Indians, then, will be keeping an anxious eye on Iraq for more reasons than one. “Definitely we view this as something to watch more carefully if this emerges to be a trend,” says Shubhada Rao, chief economist at Yes Bank. “However, if we have some semblance of control over what’s happening in Iraq over the next few weeks, probably we could see some relief.”

Indian inflation feels the heat from Iraq Jun 16, 2014 5:07pm by Avantika Chilkoti 2 inShare 1 0 The violence in Iraq has put the nation’s oil exports at risk, prompting a rise in global oil prices. For India, which relies on imports for over 75 per cent of its oil and gas needs, that could spell trouble – especially as a new government takes over in New Delhi, eager to control India’s fiscal and current account deficits while maintaining popular support. In India’s heavily regulated market, local media have warned that the losses India’s oil marketing companies suffer for providing cheap diesel could double as global oil prices rise. “Because the fuel prices are regulated, if fuel prices goes up, the losses go up,” says Dayanand Mittal, an oil and gas expert at brokerage Ambit Capital. Industry analysts hope the current surge in oil prices will be temporary but the fear is that it may affect the government’s plans to slowly deregulate the market. Oil marketing companies have been allowed to up the selling price of diesel by 50 paise a litre each month. The ‘under-recoveries’ – the losses companies make by selling below cost – in the last fortnight were about Rs1.5 a litre, according to Prayesh Jain, an analyst at India Infoline, a local brokerage. Such losses are exacerbated by interest costs and their impact on capital expenditure. Source: Crisil As prices continue to rise, losses should have been eroded over the next few months, after which prices would be entirely freed. But that was before the sudden rise in global prices. It has come at a bad time for India, as the incoming government is poised to announce a new budget designed to rein in the fiscal and current account deficits. Expensive subsidies are part of the problem. Last October, an expert group found that the subsidies on petroleum products cost the government Rs969bn ($16bn) in the 2012-2013 year, which was 38 per cent of all government subsidies. India’s dependence on expensive imports is also weighing on the country’s external balances. Imports of crude oil during the 2012-13 year were valued at Rs7.85tn, up 16.7 per cent year-on-year, according to government data, as the rupee depreciated against the dollar. The rupee weakened 0.7 per cent to 60.2 to the dollar on Monday, crossing the 60 per dollar mark again. Rising fuel prices may also affect another of the government’s priority areas: inflation. “Because oil price flows through many other commodities, it impacts transportation costs so it would affect vegetables and other prices as well,” says Mittal. The central bank held interest rates steady this month. But it warned that a possible El Nino weather pattern distorting this year’s monsoon could lead to higher food prices. This isn’t a good time for fuel prices to rise too.

per IC article and valuation metrics. . . Over the next couple of years around 392MW of projects under construction will be completed which in turn should deliver substantial returns to shareholders. This explains why analyst Adam Forsyth at broking house Arden Partners is forecasting a further ramp up in revenues and profits for the financial year to March 2015. He predicts turnover will rise by an eye-catching 81 per cent to €96m which will drive up operating profit from €27.5m to €63m. On this basis, expect pre-tax profit of €35.2m and EPS of 13 cents, or 10.5p a share. This means that Greenko’s shares are trading on around 15 times forward earnings. The price to book value is 1.5 times. Analyst Harold Hutchinson at broking house Investec predicts pre-tax profits of €34m for the same period. It’s my view that these forecasts look pretty sound as there is clear visibility on how these revenues are going to be generated from a designated pipeline of new capacity across a number of wind and hydro projects in India. For the financial year to end March 2016, analysts are predicting a further ramp up in turnover to between €146m to €178m to deliver operating profits of above €100m and pre-tax profits of between €50m to €55m. On this basis, EPS could be as high as 18.5¢, or almost 15p, which means the prospective PE drops even further to little over 10. For a company set to quadruple EPS over the next two financial years, this doesn’t seem a high rating at all to pay for a slice of those earnings. It also explains why Investec have a target price of 275p on the shares.

Good year puts wind in sails of renewables group Greenko Shares in Greenko, the Indian renewable power generator, appear to finally have the wind back in their sails after a year of improved revenues and profits, writes Michael Kavanagh. Further investment across a range of wind farm and hydroelectric assets at the Aim-quoted company drove revenues up from €38m to €53m and helped pre-tax profits jump from €8m to €13.5m in the year to March. Further spending to take its total generating capacity in the emerging economy to 1,000 megawatts in 2015 – and 2,000MW in 2018 – should drive more growth in turnover and earnings. Operational progress has coincided with an improvement in Greenko’s share price which, though below peaks close to 250p hit in 2011, is up 40 per cent over the year at 172p and above its 2007 float price of 98p.

Investors should buy shares of AIM-listed wind-power company Greenko, Questor recommended in the Sunday Telegraph. The India-focused operator’s revenue rose 38 per cent and pretax profit jumped 70 per cent in the year ended March 31st as power-producing capacity at its wind farms more than doubled. India has serious power shortage problems and Greenko (GKO) has commissioned new capacity.

And considering all the unrest in Iraq in the possibility if that impacting energy prices I think now is the time to pile into renewable energy stocks though few have the growth potential of this one IMO.

Agreed Mark! Although I did notice it took hardly any shares sold to get that movement, volumes very down at the moment. I remain positive for the medium to long term given the CEO's commitment to the AIM listing he mentioned and can see this rising strongly as sentiment to Chinese stocks returns.

5500 shares purchased, looking forward to y/e results :p

We have an AGA back home and it fits all our needs. Although (and i'm not attempting to de-ramp this thing) I do wonder it this move to China is a little short sighted. The Chinese do much of their cooking in woks on high heat but the AGA hotplate struggles to sustain these kind of temperatures for long with the top open. I'm concerned that the product wont fit the market out there as much as management expect it to . . . Thoughts anyone?