Corona Capital: Blackstone in India, Swedish banks

Aavas Financiers

27/01/2021 10:59

(The authors are Reuters Breakingviews columnists.  The
opinions expressed are their own.)
    By Breakingviews columnists
    MUMBAI/LONDON, Jan 27 (Reuters Breakingviews) - Corona
Capital is a column updated throughout the day by Breakingviews
columnists around the world with short, sharp pandemic-related
insights.

    LATEST
    - Blackstone
    - SEB

    BUILDING BACK. Blackstone’s  BX.N  bet on affordable Indian
home loans is set to pay off. Aadhar Housing Finance submitted
documents for an initial public offering in Mumbai barely 18
months after the buyout shop scooped it up, shortly before one
of the then-owners, DHFL, collapsed into bankruptcy. It promises
an impressive return against the $500 million invested.
    Aadhar is the largest lender by assets serving a $55 billion
market with an average loan size of less than 1.5 million
rupees, or about $21,000. Collections industrywide tumbled
during lockdown, but they have rebounded to as much as 95%.
Where signs of distress have emerged, pain is concentrated in
unsecured loans. Aadhar’s are all secured. On the same 6.6 times
trailing book value of closest rival Aavas  AVAS.NS , Aadhar
would be worth as much as $3.7 billion. That leaves Blackstone’s
IPO with a solid foundation. (By Una Galani)

    SCANDI EXCEPTIONALISM. Swedes are unfairly perceived by
outsiders as haughty. Based on Stockholm-listed SEB’s  SEBa.ST 
annual results, their banks have every right to be aloof. Shares
in the $24.3 billion lender popped by nearly 3% on Wednesday
after it reported https://sebgroup.com/press/news/sebs-annual-accounts-2020
 a 10% return on equity last year in spite of the pandemic, in
line with its likely cost of equity. Even though bad debts more
than doubled year-on-year, net credit losses remained low at
just 26 basis points of total lending – compared with some
battered European peers projecting multiples of that for 2020
 urn:newsml:reuters.com:*:nL8N2IC2KZ.
    Earnings resilience may have been buoyed by Sweden’s
laissez-faire approach to shutdowns, which kept companies
trading. However, loan losses may grow as Sweden tightens
business restrictions  urn:newsml:reuters.com:*:nL8N2JJ3DA. SEB is currently valued at
1.1 times estimated 2022 book value, according to Refinitiv
data, compared to what Citi analysts reckon is a European
average of less than 0.8 times. To sustain that premium
shareholders must bet Sweden’s idiosyncratic pandemic approach
isn’t in time seen as a mistake. (By Christopher Thompson)
    
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 (Editing by George Hay, Jeffrey Goldfarb and Oliver Taslic)