ICICI Bank carves out separate vertical for commercial banking

As it shifts gears from an aggressive growth phase to a period of consolidation, ICICI Bank has set up a new commercial banking division for servicing the day-to-day needs of its corporate clients.

The country’s second-largest lender has handpicked a team of 450 employees from the bank’s various segments for this new division headed by Senior General Manager Kalpesh Kikani. Services provided by this business include payments, collections, letter of credit (LCs), foreign exchange services, banker’s guarantees and loans to meet the working capital expenditure of corporate clients.

“There is nothing new about this business. Old banks have been doing this for ages. This is a difficult business to do well, but it can be a very profitable business,” Kikani said.

 

The lender plans to have 30 dedicated branches for commercial banking running by the year-end, 26 of which are already operational.

“We are known as an underwriter for big-ticket loans. Now, we want to tell companies that they can also come to us for their everyday business,” said Kikani, who heads the bank’s investment banking division as well.

According to him, the bank will leverage its wide corporate client base and 90 per cent of its target clients for commercial banking already share a relationship with ICICI Bank.

While declining to share specific figures, Kikani said the commercial banking business aims to earn as much as the investment banking division in the current financial year.

Kikani admitted that the mindset of employees will also have to change. “We are telling our people — instead of going after one large-ticket term loan, get us a large number of small-ticket LCs.” He added that commercial banking will have to be repackaged to make it more attractive to young people.

ICICI Bank is currently in a consolidation phase under which it is working to rationalise costs and reorganise the work flow in its businesses, Executive Director K Ramkumar had previously told Business Standard. The centralised structure for decision-making has been wound up and branch managers have been vested with more power.

Once the most aggressive player in the retail banking space, ICICI Bank was hit hard by bad loans on this portfolio. It is working fast to pare the size of its retail loan book and has shifted its lending focus to corporate customers.

The proportion of retail assets in its loan book was down to 49 per cent for the year ended March 31, 2009 as compared to 57 per cent at the end of the first quarter of the same year. Three years ago, the figure was as high as 69 per cent. The lender has said it would move cautiously on the retail portfolio, while continuing to expand its corporate loan book.