Asiamoney best bank awards 2018: India
Best domestic bank: Kotak Mahindra Bank
Best corporate and investment bank: Kotak Mahindra Bank
Kotak Mahindra Bank has a reputation in India for being almost infallible. Rival bankers hold the bank in high regard, especially for its business acumen, leadership, governance and deal-making ability.
|Dipak Gupta, Kotak Mahindra Bank|
Be it within corporate and investment banking, wealth management or retail banking, Kotak’s story has been one of consistent, steady and impressive improvement. And this year, it is Asiamoney’s best domestic bank in India, as well as the best corporate and investment bank.
The bank’s net profit rose from Rp34.6 billion ($533 million) in the financial year ending March 2016 to Rp49.4 billion last year – a remarkable 42.8% leap. Its return on equity increased by 2.8 percentage points from 11% to 13.8%, while return on average assets got a boost from 1.6% to 2%. It also managed to bring costs down; the cost-to-income ratio fell to 48% from 58%. Net interest income, meanwhile, improved to Rp81.3 billion from Rp69 billion.
Its performance stands out, especially when compared to its rival HDFC Bank, India’s largest private-sector bank by assets.
HDFC’s net profit was much higher at Rp145.5 billion for the financial year ending March 2017, but the numbers grew by a smaller 18% over the year. HDFC’s return on equity rose only marginally to 18.04% from 17.97%, while its cost-to-income ratio improved to 43.4%.
Take ICICI Bank as another example. Its net profit rose just a tiny 0.8% between the two financial years, while return on average equity actually declined from 1.49% to 1.35% in the year ending March 2017.
Kotak has traditionally been best known for the quality of its wholesale banking business. One thing that differentiates this operation is integration, says KVS Manian, who heads up corporate, institutional and investment banking.
“There are banks that are strong in their corporate bank piece and they have a strong balance sheet and can lend a large amount of money,” he says. “Then there are standalone investment banks that don’t have the corporate bank piece, or there are banks not as focused on transaction banking but are focused on lending with their balance sheet. But we are unique — we have a franchise across these three.”
Manian has a point. The bank’s corporate and wholesale banking revenues jumped to Rp82.8 billion in the last financial year, from Rp68.2 billion the previous year. In equity capital markets, the bank ranked second in the league tables in 2017, behind Citi, with credits for $2.8 billion through 22 transactions, giving it a 9.31% market share. It was a big improvement over 2016, when Kotak ranked third, with 13 trades worth $701 million, according to Dealogic.
Kotak was on some marquee deals in 2017, including a $1.3 billion-equivalent IPO for SBI Life Insurance, a $2.3 billion qualified institutional placement for State Bank of India, a $1.7 billion listing for General Insurance Corp of India and a $1.5 billion IPO of New India Assurance, to name just a few.
In the M&A market, Kotak ranked sixth in the adviser league table last year for announced deals. In DCM, however, Kotak has less of a foothold. Last year, it ranked 11th in the bookrunner league table for Indian rupee bonds.
Kotak has proved time and again that it is very close to its biggest corporate clients. Its ECM roster last year included the likes of Apollo Tyres, Bajaj Finance, Godrej Agrovet, Piramal Enterprises, Mahindra Logistics and InterGlobe Aviation. But it is also looking to build its client base, with a particular focus on the mid-market corporate segment and startups, offering the latter transaction banking and foreign exchange services, as well as some structured lending.
Kotak is looking beyond its borders, especially in investment banking. It now has three international alliances – with Sumitomo Mitsui Banking Corp on the Japan or East corridor, with investment banking advisory firm Evercore in the US and with ING Bank in Europe. Deals with an international angle are now starting to flow.
The bigger surprise in these awards will be the decision to make Kotak Mahindra the best overall domestic bank. But it has been making big inroads into the retail market. Revenues from the firm’s retail banking arm got a boost to Rp102.7 billion for the year ending March 2017 from Rp93.4 billion the previous year — a hike of close to 10%. The division has contributed to the biggest chunk of revenues broken down by segment for the last two years.
Assets within retail banking rose to Rp1.23 trillion from Rp1.19 trillion. Deposits into branches in the country, meanwhile, rose to Rp1.55 trillion year on year from Rp1.36 trillion.
Then there’s digital, the battleground in Indian retail banking. In March 2017, Kotak launched India’s first downloadable bank account with biometric authentication, called Kotak 811. This allows a client to open an account online rapidly and in paperless form. Only Aadhar numbers — a unique identity number issued to all Indian residents — and permanent account numbers (Pan) are required to open an 811 account.
“We came up with a reasonably innovative product to acquire customers digitally,” Dipak Gupta, joint managing director of Kotak and part of its executive board, tells Asiamoney. “Traditionally it would take us between four and seven days to open a customer account, but now we acquire three times more customers every day than we did earlier. That wouldn’t have been possible without this digitization process.”
Kotak’s volume of mobile banking transactions grew 138% by March 2017 from the same time the previous year, while the value of mobile banking transactions grew 143%.
Best bank for CSR: State Bank of India
Corporate social responsibility has always been ingrained in State Bank of India’s ethos. It goes as far back as 1973 when the idea of CSR was introduced by the firm as ‘innovative banking’, a way to focus on the economic development of the underprivileged in society through non-banking activities.
Rajnish Kumar, State Bank of India
That focus has never wavered, only strengthened. So much so that in June 2015, the bank launched the SBI Foundation, a not-for-profit entity, to consolidate its CSR activities under one platform.
But the bank itself has also continued with its mission. In the financial year ending March 2017, SBI spent Rp1.09 billion ($16.8 million) on CSR-related activities, of which around Rp890 million was disbursed by the bank’s head offices and the remainder donated to the foundation.
SBI has put its CSR focus into four areas: offering healthcare, education, skill development and creation of livelihood and, finally, protecting the environment. But it is to healthcare development that the bank has allocated the maximum funds — an area that is of key importance in India where healthcare is often either unaffordable or unavailable to a big chunk of the population.
It has pumped money into a large number of charitable organizations and hospitals to help them buy medical and surgical equipment, as well as ambulances.
It has also tied up with local NGOs to run health camps in rural India.
Its emphasis on education is also notable. SBI’s contributions have ranged from putting money towards supporting infrastructure in schools to setting up computer or IT labs as well as organizing school buses to provide transport for children. It has also pushed the rural population to improve their skillset by offering training programmes.
This leads to a natural question around SBI’s role in environmental protection, given the increased focus on green financing and green bonds in recent years. But while the bank has put together a green bond framework, it is yet to sell an international green bond.
However, it has made its mark in other ways — by acquiring solar power plants and lamps, and commissioning and maintaining solar power plants.
It has also worked on installing windmills for captive power consumption, and became India’s first state-owned bank to publish a separate sustainability report. With such strong credentials, SBI has an unrivalled position as the best bank for CSR in India.
Best bank for SMEs: YES Bank
In a country like India that boasts millions of micro, small and medium-sized enterprises (MSMEs), catering to their financial needs is critical, especially as SMEs contribute about 45% of India’s industrial output and employ as many as 42 million people.
Rana Kapoor, YES Bank
Yes Bank has done the job exceptionally well. Its focus on areas such as women-owned enterprises, or small- and medium-scale enterprises in low-income states, and those in poor economic conditions, has ramped up over the years.
In the financial year 2016/17, the bank divided Rp187 billion ($2.9 billion) among SMEs, up from approximately Rp132 billion the year before.
The lender has also tied up with Overseas Private Investment Corp, the US government’s development finance institution, on a handful of occasions to further its strategy. In July 2017, Yes signed an agreement where Opic will provide $75 million in financing and a syndicated loan of up to $75 million that will be jointly arranged by Wells Fargo and Opic.
Of that, $50 million will be used to expand support to women-owned businesses and another $50 million for SME businesses in low-income Indian states.
That was the third transaction between Opic and Yes and followed a $265 million deal the previous year also to support SMEs.
But Yes has not stopped there. It has gone on to combine its focus on SMEs with its credentials in the area of CSR (Yes has long been a champion of green finance and financial inclusion) to make MSMEs sustainable. That project first kicked off in 2014/15; in the 2016/17 financial year, it impacted more than 2,000 MSMEs.
The bank, led by managing director and chief executive Rana Kapoor, also took MSMEs under its wing when it came to educating them on the landmark goods and services tax (GST) rolled out in 2017. Yes launched a programme to mentor smaller businesses to prepare and have the technology in place to tackle GST.
The scheme was popular both online and on the ground. Yes managed to reach as many as 3.9 million MSMEs using social media between July 2 and October 30, and saw 450,000 MSMEs access its online portal on GST. More than 10,000 MSMEs have attended Yes-organized events around GST.
This approach has served India’s fifth-largest private sector bank well, making it the deserving winner of Asiamoney’s best bank for SMEs in the country.
Best digital bank: Axis Bank
The Asiamoney award for the best digital bank in India was a hotly contested one. Since prime minister Narendra Modi’s unexpected demonetization announcement in November 2016, banks have been pushing out their digital agendas opportunistically, as a large part of the population, along with thousands of businesses, was forced to go cashless.
Through it all, Axis Bank excelled. The winner of this award for the second year running, the firm has made mobile banking and payment its focus — a smart move, given that the number of mobile phone users in India is estimated to have gone up from around 525 million in 2013 to as many as 730 million last year.
But while mobile phone usage has increased, many still don’t have access to an internet connection. Axis has targeted them by launching Axis OK, a mobile app based on SMS or missed calls, which effectively allows users to perform almost all internet banking functions without an internet connection.
It was also one of the first firms to launch a Unified Payment Interface app called Axis Pay, which allows clients of any bank to transfer money to any other bank easily, simply by creating a unique virtual payment address.
Axis Bank’s mobile banking channel witnessed over 100% growth in both value and volume during the financial year, while electronic channels continued to form 87% of overall customer initiated transactions.
Its emphasis on digital payments has paid off; the bank had a 66% share of digital transactions in the fourth quarter of the 2017 financial year, compared with 51% the year before. Card spending rose 47% year on year.
The bank has also made everyday life easier for people. It had tied up with Bengaluru Metropolitan Transport to launch a prepaid smart card for public transport passengers in 2016. It took that a step further in June last year, signing a similar agreement with the metro rail operator in the city of Kochi in Kerala.
Others, both domestic and international banks, are stepping up too and are giving Axis Bank a run for its money. HDFC Bank, for instance, has seen revenues from digital innovation products increase a lot between March 2016 and January 2018. Its digital customer base has also risen rapidly.
But for remaining consistent and successfully holding its peers at arm’s length, Axis Bank deserves to be the winner.
Best international bank: Citi
When Asiamoney asked a handful of senior bankers at domestic firms in India to suggest the best international bank in the country, their response was almost unanimous. When Asiamoney posed the same question to international banks in India, they didn’t mince their words either. Citi dominates the Indian market among international banks.
Pramit Jhaveri, Citi
Be it consumer banking, corporate and investment banking or commercial banking, Citi stands apart.
Its annualized new premium growth in the consumer-banking arm last financial year was 17% higher than in 2016. It boasts 1.2 million retail customers and 1.8 million credit card customers as of March 2017 – and increased its consumer banking revenues by around 31% over the last four years.
It has also more than embraced the shift to digital banking. Over 35% of the lender’s cards are acquired digitally, while digital payments account for nearly 90% of total card payments received by the bank. On the commercial banking side, Citi caters to more than 3,000 clients and has extended about $3 billion of credit.
That’s not all. The investment banking team has been firing on all cylinders. Citi completed 17 debt capital markets transactions as a bookrunner last year, giving it a 3.1% market share, up from the 2.7% market share it had in 2016, according to Dealogic.
It ruled India’s equity capital markets in 2017, ranking first on the bookrunner league table with credits of $3.26 billion through 22 transactions and a hefty 10.6% market share.
Its M&A franchise was also strong, with the bank involved in seven announced transactions worth $8.6 billion versus nine deals for about half that amount in 2016.
The numbers show that the bank is doing things right in the country. Citi India, under the leadership of chief executive Pramit Jhaveri, reported a profit after tax of $559 million for the year ending March 31, 2017, an increase of 12.1% over the year. Profit before tax was $954 million, up 7.1%. It’s a worthy winner of the best international bank award in India.
Best private bank: Edelweiss Private Wealth Management
Bankers at Edelweiss Private Wealth Management have plenty of tricks up their sleeves to expand their business and win over clients – tricks that are working well.
Anshu Kapoor, Edelweiss Private
The wealth manager has increased its assets under administration by an impressive 16 times over the last seven years to around $13 billion, while also boosting its gross revenues to about $84 million in the last financial year.
This is an impressive feat and comes hand-in-hand with the rise in population of not just high and ultra-high net worth individuals in India, but also the mass affluent.
Edelweiss has also had to compete with peers such as IIFL Wealth, last year’s winner of this award, which has been equally quick to find opportunities in this booming market.
Edelweiss deserves recognition for expanding its business rapidly. Anshu Kapoor, who heads up the firm’s private wealth management business, reckons the key to success is to clearly answer this question: who is my customer?
Edelweiss has put its focus on four client segments: next generation and entrepreneurs; family offices; C-suite clients with employee stock ownership plans; and professional investors.
With that established, the firm’s next task was to define exactly what kind of business it is in. In Edelweiss’s case, it was to use their specialization and expertise to “understand clients and their dreams, ambitions and aspirations and address their concerns,” Kapoor tells Asiamoney.
The firm has given a fillip to its business by using a combination of technology, client town halls, product innovation and having experts across all the relevant fields. It is also willing to create exotic and structured products for the right clients and encourages them to diversify away from typical safe investments into real estate and precious metals.