Indian Banks - Performance Benchmarking February 2013
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50%
8.6%
10%
0% Loan growth
0%
29.8%
30.0%
20% 10% 0%
Retail loan growth Kotak Bank Indusind Bank
22.2%
40% 30%
20%
10% -10%
30%
50% 24.8%
20%
40%
29.6%
30%
20.9%
40%
38.2%
50%
44.5%
60%
22.3%
60% 30.8%
60% 24.3%
Earnings Growth
20.7%
Retail Loan Growth
26.8%
Loan Growth
34.7%
Indusind outperformed in loan growth while Yes showed the best earnings growth in 2012
Axis Bank Yes Bank
Earnings growth HDFC Bank
• Kotak’s loan growth was quite impressive with around 27% growth in 2012 • Both Yes Bank and Kotak were aggressive in tapping retail customers, however, Yes Bank lags far behind Kotak Bank in retail loan growth. Kotak Bank’s retail growth was around 21% in 2012 • Lower earnings growth of Kotak, compared to its peers, is a major concern for Kotak. Kotak’s earning grew by 25%, whereas some of its peers grew at a rate more than 30%
Source : Deutsche Bank Report
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Axis bank is aggressively adding adding branches to increase its geographic presence
0
0
Branches added during the qtr Kotak Bank
Axis Bank
Indusind Bank
Yes Bank
81
96
2% 77
12
20
46 18
100
3.0%
294
3%
300 200
3.5%
4%
400
4.1%
5%
500
100 50
6%
3.6%
600
150
Net Interest Margin 3QFY13
575
700
156
200
Branches added during 2012
4.6%
Branches added during 3QFY13
1% 0%
Branches added (12 months)
NIM
HDFC Bank
• Most of the new private banks – Kotak, Yes and IndusInd - added branches, their contribution is marginal in comparison to the branch additions by large private banks • Axis added 575 branches in the last 12 months ending Dec 2012, reflecting its aggressive expansion in various geographies • The net interest margin (NIM) for Kotak is best among its peer-set, in fact, even better than HDFC during the last quarter ending Dec 2012
Source : Annual report and Deutsche Bank Report
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The efficiency ratio of Kotak Bank indicates poorly managed operations Efficiency Ratio Definition
Efficiency ratio – in % (Except per share) 80% 75% 70% 65% 60% 55% 50% 45% 40% 35%
75.3%
71.7%
55.7%
67.6%
•
52.6% 49.5% 45.5%
49.3% 44.5% 41.7%
2010 Axis bank
•
71.8%
70.6% 51.2% 49.7% 43.9%
71.7%
Yes Bank
39.7%
38.8% 2011 Kotak Mahindra Bank
2012 IndusInd Bank
ICICI Bank
• HDFC Bank
The Efficiency Ratio (also known as Cost to income ratio) is an efficiency measure commonly used in the financial sector Calculation: Operating Expenses/(Net Interest Income+ commission & fees received +other operating income+ Investment money – commissions and fees paid+ taxable equivalent adjustment) Lower the efficiency ratio, the better managed is its operations
• Ideally, banks efficiency ratio should be below 50%, while a ratio under 40% is considered excellent • Kotak is struggling with higher efficiency ratio, which is close to 70% • However in 2012, the bank has shown some improvement by bringing down the ratio to 67.6%, primarily driven by the better rationalization of employees and better utilization • Yes Bank, IndusInd Bank and Axis Bank have comparatively better efficiency ratio, which were under 50% in all the three year from 2010 to 2012
Source : Bloomberg, SGS Research
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Thank You
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