Honouring the Financial Wizards

Honouring the Financial Wizards Indian stock markets reached new highsin 2014-15, especially after the new government took charge in May 2014. TheBSE Sensex rose 25 per cent during the period. The year was full of greatopportunities for investors. In such a scenario, many financial institutionsdid exceedingly well. They not only provided high returns but also ensuredinvestors' stability and financial well-being.

To honour and recognise them, we bring the third edition of BusinessToday-Money Today Financial Awards. The awards considered the entire valuechain to identify financial service providers - banks, insurance and mutualfunds - which have performed the best in their categories.

India's Best  Banks-Methodology

Business Today and KPMG have been partners for this study since 1997.This year, we have three new qualitative awards - for Innovation, DigitalBanking and Financial Inclusion. To top it all, the jury decided to give threemore subjective awards - Bank of the Year, Most Improved Bank and MostFuture-Ready Bank. The jury comprised just the right mix of people. Former Chairmanof State Bank of India, O.P. Bhatt, led the way. Others were Bharat Doshi, whorecently quit Mahindra Finance to join as Director on the central board of theRBI, Chaitanya Kamat, MD & CEO, Oracle Financial Services Software, andAshok Wadhwa, Group CEO, Ambit Holdings.

Quantitative Rankings For rankings based on pure financial performance,the data was taken from published annual reports of the banks for the period2011/12 to 2014/15. The survey covers 65 scheduled commercial banks that hadannual reports published in public domain or provided their annual reports atthe time of conducting the survey prior to October 31, 2015.

Five banks were included for the first time. These banks had completedfour years of operations as on March 31, 2015, and their annual reports areavailable in public domain for this period.

The three broad ranking parameters, divided into 28 sub-parameters, areas follows: Growth: There are five sub-parameters in this category. They are:(a) growth over 2013/14 in deposits, alongside three-year compounded annualgrowth rate (CAGR) of total deposits; (b) growth over 2013/14 in loans andadvances, alongside three-year CAGR in loans and advances; (c) growth over2013/14 in fee income (commissions, exchange, brokerage plus miscellaneousincome), alongside three-year CAGR in fee income; (d) growth over 2013/14 inoperating profit, alongside three year CAGR in operating profit; and (e)absolute increase in market share of deposits and of current account savingsaccount balances.

Size: There are three sub-parameters: size of total deposits, size ofoperating profit, and size of balance sheet for 2014/15. Strength: There arefour overarching sub-parameters, each with further sub-divisions. a) Quality ofAssets; b) Productivity and Efficiency; c) Quality of Earnings Return onassets; d) Capital Adequacy Ratio

THE PROCESS

Banks are divided between Indian banks (consisting of public and privatesector banks) and foreign banks (branches operating in India) for the purposeof determining the categories. The banks in each of the above mentionedcategories are further classified based on balance sheet size as on March 31,2015. 

HDFC BANK

Bank ofThe Year, Best Bank - Digital, Best Bank - Large          

India'ssecond largest private sector bank, HDFC Bank, has always been known for itsservices to retail customers and consumer business. The bank's digitalinitiatives have changed the world of banking in India. The initiatives on thenet banking platform (bank, mutual fund, demat account, etc) and 10-second loanapproval initiative in personal loans have made its services even better. Thedigital application platform introduced for instant e-approval to retail loanapplications allows customers to fill application forms online with help from arepresentative. The bank has also been single-mindedly focused on breaking intorural and semi-urban areas, which account for 60 per cent of India'spopulation. The NPAs, at 0.25 per cent, are the lowest among all banks andreflect the strong appraisal processes followed by the bank.

"Thechanges in the operating model have brought in efficiencies in terms of fasterturnaround and lower cost as transactions are processed concurrently ratherthan sequentially" Aditya Puri, MD & CEO, HDFC Bank

KOTAKMAHINDRA BANK

MostFuture Ready Bank

The bankhas aggressively scaled up its footprint with the acquisition of ING VysyaBank,  snapped up for $2.4 billion in anall-stock deal (Uday Kotak's own stake in the bank has fallen from around 40per cent to 33.4 per cent).

In asingle stroke, Kotak Mahindra Bank's balance sheet size has pole vaulted fromRs 95,430 crore to Rs 1,06,012 crore it is now India's fourth largest privatebank after ICICI Bank, HDFC Bank and Axis Bank. Also, the bank is known for itsuniversal model. Kotak Mahindra Prime is the second-largest profit generator(Rs 507 crore in 2014/15) within the Kotak group.

KotakSecurities is one of the big names in the broking business with income close toRs 1,000 crore and net profit of Rs 290 crore in 2014-15. Kotak Life Insuranceis building a profitable insurance business with Rs 3,000 crore annual premium.Also, Kotak AMC, which manages the mutual fund business, has an AUM of close toRs 55,000 crore.

"We wantto experiment. We want to learn. If I look at India from a five-year view, it'sa great time to build businesses here. But, to succeed, banks not only have tobe future ready, but also have to win the trust of their clientele for the longhaul" Uday Kotak , Vice Chairman and MD, Kotak Mahindra Bank

YESBANK

MostImproved Bank, Best Bank - Mid-sized

 Yes Bankhas been upping the ante. Till recently, it was focusing on corporate andcommercial lending that saw it rake up a balance sheet of Rs 1.36 lakh crore in11 years. Now, to scale up its retail book, it is launching its credit cardbusiness, besides rolling out a fund management arm. It is alsoemploying technology to reach the masses with innovative use of technology.

"We havepractically ended our innings as the largest medium-sized private sector bank.We are aiming to be in the large bank category by March 2020" Rana Kapoor, MD& CEO, Yes Bank

STATEBANK OF INDIA

Best Bank- Financial Inclusion       

It hashelped lakhs of people in rural India earn a living. Plus, it is usingtechnology and banking correspondents to take services to remote areas. It hasalso become a serious player among banks in encouraging self-employment inrural areas through Rural Self Employment Training Institute. More recently, itwas at the forefront of opening no-frills accounts under the Prime Minister JanDhan Yojana.       

"It'snot just about bringing more people into the banking system and giving themloans for income generation. We also have to see that they generate sufficientincome to repay the loan" Rajnish Kumar, Managing Director (National BankingGroup), SBI

ICICIBANK

Best Bank- Innovation          

 ICICIBank is undoubtedly way ahead of the pack in innovation. Apart from digital,its innovation touches financial inclusion as well. ICICI became the firstprivate sector bank in 2013 to introduce Branch on Wheels' that provides basicfacilities to unbanked villages. A bank of the size and scale of ICICI Bank hasmanaged an outstanding cost to income ratio. In fact, it is the best amonglarge banks. ICICI Bank's cost to income ratio at 0.37 is better than thecorresponding figures of SBI (0.50), HDFC Bank (0.45) and Axis Bank (0.41).

"In theyouth segment, many are not eligible for credit cards. So, there is a lot ofinterest in a physical card, and we have seen good usage"  Abonty Banerjee, General Manager and Head ofDigital Channels at ICICI Bank

RBL BANK

Best Bank- Small

RBL Bank has broken quite a few records over the past five years. Thebank has a comfortable capital adequacy ratio of 13.13 per cent and one of thelowest net NPA s of 0.27 per cent. With 60 per cent branches in rural andsemi-urban areas, it is well-suited to serve the bottom of the pyramid wherethese new banks are also expected to operate. In the past, it has hired a lotof talent from microfinance companies for self-help group, joint liabilitylending and micro-lending businesses.

Both financial inclusion/microfinance and agriculture businesses accountfor about 45 per cent balance sheet and more than one-third income. The bank,which was earlier primarily into lending to local traders in Maharashtra, isnow also giving loans to mid-level companies as well as SMEs. It has alsoentered treasury, foreign exchange, and trade and cash management segments.

"It's a long journey, which needs a lotof hard work and sweat. It was clear to us that we were building an institutionto leave behind some positive legacy" Vishvawir Ahuja, MD & CEO, RBL Bank

DEUTSCHEBANK

Best ForeignBank - Large

The Indian unit of the bank stood out. It bucked the global trend toreport an impressive performance almost an outlier in Deutsche's global map.The numbers speak for themselves. A massive 93 per cent jump in profits to Rs1,406 crore in 2014/15. The loan book increased by 25 per cent to Rs 36,138crore. It also has the best asset quality at a time when banks in India arewitnessing a deterioration in the quality of their loan books. In fact,Deutsche Bank India's asset quality (0.13 per cent) is far superior to otherlarge foreign banks in India including Standard Chartered, Citibank and HSBCIndia. The bank has exposure to chemicals, metals, engineering and NBFCs.

"We will bring new products,technologies, risk management strategies, etc. Foreign banks are committed toIndia and will continue investing" Ravneet Gill, CEO, Deutsche Bank

CREDITSUISSE

BestForeign Bank - Mid-sized

In themiddle of a global restructuring exercise, Credit Suisse AG, India, is carvingout a unique way to map its growth path. With a balance sheet of Rs 11,070crore and just one branch in Mumbai, Credit Suisse is doing roaring business byservicing entrepreneurs and high-net-worth individuals Today, it offersbanking, wealth management and investment banking services, along with itssecurities business in fixed income, equities and more.

"We can expand, but I don't think it isneeded at the moment. Since the commencement of our bank in 2011, we have beenadopting the strategy of growing cautiously" Mihir Doshi, Country Head, CreditSuisse AG