ICICI Bank adopting a 360-degree approach in corporate banking business

Analysts see risk of attrition due to the shift in culture its implementation

The country’s second largest private sector lender, ICICI Bank, is adopting a 360-degree approach in its corporate banking segment, wherein corporate relationship managers will not only act as loan facilitators, but also aimm to capture the entire corporate ecosystem to offer a wide range of services, the banks' top management told analysts.

That said, the bank asserts that retail, SME and business banking will be its key growth drivers, going forward.

In Q2, the bank saw its advances grow 23 per cent year-on-year (YoY) and 5 per cent sequentially to Rs 9.38 trillion, with the retail portfolio growing 25 per cent YoY and six per cent sequentially. Business banking grew 43 per cent YoY and 11 per cent Q0Q, and the corporate segment grew 23 per cent YoY and 7 per cent sequentially.

“A corporate 360-degree approach is about providing corporate solutions, statutory solutions, supply chain solutions, employee solutions, and family office needs,” said Motilal Oswal in a report, quoting the banks’ top management.

According to analysts, the corporate relationship manager's role has changed to that of a co-anchor, curator, connector, and facilitator to drive not only the lending relationship but also capture the corporate ecosystem by offering payments, liability, treasury/forex/derivative, and TPD products and services. The focus is on engrained customer engagement and enhancing customer-level return on equity (RoE).

In the analyst call, the bank reiterated the emphasis on its core philosophy of focusing on core operating profits in a risk-calibrated manner. The idea is the bank would trade income to protect capital but won’t trade capital to get income.

The private sector lender has seen its tech spends go up significantly in the past few years, as it is building tech stacks across business verticals, be it retail, SME, and corporate. This is to enable customers to go on an end-to-end digital journey, with improved customer experience.

According to a report by BNP Paribas, “The bank was very clear that tech investments remain a strategic priority and feels no need to rationalise away from the 9-10 per cent of opex, the global benchmark for investments".

“Digital is emerging as a force multiplier and the bank has seen more than 1.5-2x growth across select business segments at a far lower customer-acquisition/servicing cost,” analysts at Emkay Global said in their report.

While most banks in the country follow a direct incentive-fostered sales culture, analysts said ICICI Bank have made it clear that they are implementing a flat remuneration structure with an eye on reducing channel/product conflicts. The compensation and rating structure is being made fair and more equitable and not skewed towards high performers.

According to analysts, there could be some downside risks to this move. "With this approach, there could be attrition and loss of morale at branch-level sales," said analysts at BNP Paribas.

“In our view, this is quite a radical approach of doing business. We worry whether this approach could see some high performers leaving the bank”, said Macquarie Research in its report.

“While the approach taken by the bank ensures very strong asset-quality outcomes. Growth could suffer in the absence of higher incentives for top performers. The management believes uniform incentives and equitable distribution could, in fact, keep employees motivated,” the report added.

Analysts said the bank has unveiled its go-to market strategy, which entails taking the entire bank to the customer instead of just a few specific products. Consequently, it has merged the rural banking centres with retail centres, fully aligned retail assets distribution with liabilities, and converged MSME/private banking teams with retail and credit business centres, co-located in business centres.