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The retail king gets the crown

K V KamathK V Kamath has gone beyond just numbers by being innovative and creating new markets

On October 25, 2001, ICICI Managing Director and Chief Executive Officer Kundapur Vaman Kamath and ICICI Bank Managing Director Hoshang Noshirwan Sinor entered the Reserve Bank of India headquarters. Half an hour later, a beaming Kamath and Sinor left the then RBI Deputy Governor Y V Reddy’s cabin.

Their mission was accomplished. The country’s first universal bank was to be formed five months later, with the reverse merger of ICICI with ICICI Bank.

Rewind to a year ago, and the mood was very different in ICICI. The scene and the dramatis personae were the same, but a different drama unfolded on the RBI’s 18th floor. On October 5, 2000, Kamath, Sinor and a core team made a 40-minute, 22-slide presentation to a trio of RBI deputy governors. The presentation outlined how ICICI would metamorphose into an universal bank. But that day, Kamath was not smiling as the regulators were not happy.

A week later, in a teleconference with foreign institutional investors, a disappointed Kamath said ICICI would become a bank only after a transition path was finalised with its stakeholders and approved by the regulator.

As on November 10, ICICI Bank with Rs 74,315.82 crore market capitalisation is way ahead of the State Bank of India (Rs 59,729.79 crore), its peer in the private sector HDFC Bank (Rs 32,852.62 crore) and accounts for close to 24 per cent of the market capitalisation of listed Indian banks.

In terms of assets, it is still a distant second to SBI. As on March 31, 2006, its asset base was Rs 2,51,389 crore compared with SBI’s Rs 3,93,870 crore. The gap has, however, been narrowing fast. The compound annual growth rate (CAGR) of ICICI Bank’s assets for the last three years has been 23.86 per cent against SBI’s 7.06 per cent.

Kamath has not only rescued the old ICICI, which was wilting under the burden of bad loans and growing asset-liability mismatches, by converting it into a bank, but also transformed it into a retail juggernaut.

In five years, he has built a retail portfolio of over Rs 1,00,000 crore. In percentage terms, retail assets now account for 69 per cent of the bank’s total assets. Of this, 51 per cent is mortgages.

With 630 branches, ICICI Bank services 20 million customers. It is the leader in practically all retail loan segments – mortgages, auto finance and credit cards.

Despite growing at a break-neck speed, Kamath has been able to contain net non-performing assets (NPAs) at 0.72 per cent of its total assets in March 2006. The comparable figure for HDFC Bank is 0.44 per cent and SBI 1.87 per cent.

The process of selecting the BS Banker of the Year was by no means an easy one. In the first stage, a perception survey was undertaken among finance professionals. In the second stage, the Business Standard Research Bureau took a close look at the financials of all leading banks.

The focus was on the three-year CAGR of assets, operating and net profits and net worth besides other parameters such as return on net worth, return on assets, NPAs and market capitalisation.

At the final lap, the senior editors of Business Standard had a brain-storming session on the performance of top bankers.

IDBI Bank, Centurion-Bank of Punjab and Kotak Bank have done well on most of the parameters but none of them could be considered for the coveted title as IDBI Bank and Centurion-BOP had the benefit of mergers and acquisitions, while Kotak Bank has a relatively smaller base. Among public sector banks, Allahabad Bank too fared well.

Finally, the focus was on two banks – HDFC Bank and ICICI Bank (the third bank which has done extremely well on most of the parameters is UTI Bank whose Chairman PJ Nayak was the BS Banker of the Year in 2004-05).

In most of the financial parameters, HDFC Bank has bettered ICICI Bank, but the award goes to K V Kamath for two reasons. First, ICICI Bank is more than three times bigger than HDFC Bank and, hence, the growth rate cannot strictly be comparable. Finally, what helped Kamath, 58, clinch the Banker of the Year crown was his innovative streak and the creation of niche markets.

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