EVOLUTION OF PRIVATE BANKS IN INDIA

Transcription

1 EVOLUTION OF PRIVATE BANKS IN INDIA 18 th April 2013 Presentation to: ESCAP-ITC Second Technical Capacity Building Workshop April 18, 2013

2 Structure of Financial Institutions in India Commercial Banks Non-Banking Financial Cos (NBFCs) Asset Finance Cos Investment Cos Loan Cos 13 Infrastructure Finance Cos Residuary NBFCs Co-op Banks 2

3 10 New private sector banks have gained significant share Foreign Banks New Pvt. Sector Banks Old Pvt. Sector Banks Assets shift dramatically towards new private sector banks CAGR Total banking assets (Rs Trillion) 11 ( ) ~18% % % 6.7% 15.7% 4.5% Nationalised Banks (other than the SBI Group 50.5% 51.4% SBI Group 29.8% 21.3% End-March Data is for end-march of the respective years 3

4 Private sector banks have been more profitable, with superior asset quality Return on Assets (%) Asset quality (Non-Performing Loans) (% of Advances) Foreign 4. GNPA % of Gross Advances 2.2% 1.7% 1.3% 1.2% % 0.6% 1.1% 1.4% 0.8% 0.8% Public 1.9% sector 1.6% Private sector 1.6% 2.1% 2.3% % 1.1% % % % 0.9% 2.1% 1.1% % 1.3% 1.7%1.8% 1.5% 1.4% 1.1% % 3.5% % 2. Public Sector Banks Private Sector Banks 0.2% 0.4% % Q3F10 Q1F11 Q3F11 Q1F12 Q3F12 Q1F13 Q3F13 4

5 partly due to mix of businesses while maintaining operational efficiency Ratio of Non-interest Income to Operating Expense (Fee incomes + Trading profits) (%) Intermediation cost (Operating expenses as % of assets) 14 Public Sector 4% Foreign Public Sector % New Private Sector Foreign New Private Sector Old Private Sector % 9 85% 77% 74% 88% 81% 79% 8 3% % 2.6% % 56% 2% 2.3% 2.1% 2.2% 2.1% 1.7% 2.2% % 2 1.5% 1.5% % 1.1%

6 How did this happen? Five key drivers of success of new private sector banks Technology for Operational Efficiency + Automated Transactions Channels Relationship Management Channels Key drivers of success of new private sector banks These combine to provide product innovation and focus Operational efficiency Sales & Distribution Channels 6

7 Operational efficiency increasingly achieved through centralisation of processes Degree of centralization in early years Banking activities Typical new private sector bank Typical public sector bank Demand Draft / Pay Order issues Account opening Inward clearing queries Cash reconciliation Payment of branch bills Outward clearing data entry and verification Internal transfers processing Printing bulk Demand Drafts and Pay Orders System related activities, e.g. commissions and charges Tax Deduction at Source (TDS) certificates Select Inter Branch Reconciliation (IBR) transactions Processing select customer requests, e.g. ATM cards, PIN mailers Note: Most of the charts ain this and following slide re indicative Centralized activities

8 Private sector banks understood customer transactions Rapid growth in ATM and POS network At end-march 2007 Distribution of ATM networks (Numbers) At end-march 2008 Point of Sale (POS) terminals ( 000s) , ,103 Foreign Private sector Public sector Foreign ,329 49,666 Public sector Private sector 50 ATM network Branch network ~36% share in ATM network vs ~12% share in branch network 0 ICICI Bank Axis Bank HDFC Bank Citibank HSBC IDBI Bank of Baroda ~82% share in POS terminals Others Total 8

9 Relationship managers for the Affluent New Private Sector Banks have made strong inroads into the mass affluent segment 1% 2% 7% 26% 64% 3% 7% 27% 26% 37% Annual household Income (Rupees p.a.) > 10,00,000 5,00,000 10,00,000 2,00,000 5,00,000 90,000 2,00,000 < 90,000 Affluent Mass Affluent Mass Debt syndication Wealth Management Services Debt syndication and Wealth Management Services (Shares of bank groups, 2008) % 5 43% 5 0.6% Industry Typical Pvt Sector Bank Foreign Private Sector Public Sector 9

10 and a low cost sales force for the Mass Affluent Feet on street Feet on street sales force to acquire savings and current account deposit customers Account for ~5 of new retail deposit customers Large sales force, from 5,000 to 15,000 in the large private sector banks Sales agents Outsourced sales agents appointed for loans and credit cards Supported by CRM initiatives and customer analytics to generate leads Alliances Creating alliances at point-of-sale to capture retail loan business Builders for mortgages Automobile dealers for financing cars, 2-wheelers and commercial vehicles Products requiring low cost sales force Estimated Share of Private Sector banks No. of Private Sector Banks in the Top Five Bancassurance 53% 3 Mutual Fund distribution 47% 2 Credit Cards 51% 2 Cash Management 51% 3 Debit Cards

11 Thank You 11