Honouring the Financial Wizards Indian stock markets reached new highs in 2014-15, especially after the new government took charge in May 2014. The BSE Sensex rose 25 per cent during the period. The year was full of great opportunities for investors. In such a scenario, many financial institutions did exceedingly well. They not only provided high returns but also ensured investors' stability and financial well-being.
To honour and recognise them, we bring the third edition of Business Today-Money Today Financial Awards. The awards considered the entire value chain to identify financial service providers - banks, insurance and mutual funds - 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, Digital Banking and Financial Inclusion. To top it all, the jury decided to give three more subjective awards - Bank of the Year, Most Improved Bank and Most Future-Ready Bank. The jury comprised just the right mix of people. Former Chairman of State Bank of India, O.P. Bhatt, led the way. Others were Bharat Doshi, who recently quit Mahindra Finance to join as Director on the central board of the RBI, Chaitanya Kamat, MD & CEO, Oracle Financial Services Software, and Ashok 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 period 2011/12 to 2014/15. The survey covers 65 scheduled commercial banks that had annual reports published in public domain or provided their annual reports at the time of conducting the survey prior to October 31, 2015.
Five banks were included for the first time. These banks had completed four years of operations as on March 31, 2015, and their annual reports are available in public domain for this period.
The three broad ranking parameters, divided into 28 sub-parameters, are as follows: Growth: There are five sub-parameters in this category. They are: (a) growth over 2013/14 in deposits, alongside three-year compounded annual growth rate (CAGR) of total deposits; (b) growth over 2013/14 in loans and advances, alongside three-year CAGR in loans and advances; (c) growth over 2013/14 in fee income (commissions, exchange, brokerage plus miscellaneous income), alongside three-year CAGR in fee income; (d) growth over 2013/14 in operating profit, alongside three year CAGR in operating profit; and (e) absolute increase in market share of deposits and of current account savings account balances.
Size: There are three sub-parameters: size of total deposits, size of operating profit, and size of balance sheet for 2014/15. Strength: There are four overarching sub-parameters, each with further sub-divisions. a) Quality of Assets; b) Productivity and Efficiency; c) Quality of Earnings Return on assets; d) Capital Adequacy Ratio
Banks are divided between Indian banks (consisting of public and private sector banks) and foreign banks (branches operating in India) for the purpose of determining the categories. The banks in each of the above mentioned categories are further classified based on balance sheet size as on March 31, 2015.
Bank of The Year, Best Bank - Digital, Best Bank - Large
India's second largest private sector bank, HDFC Bank, has always been known for its services to retail customers and consumer business. The bank's digital initiatives have changed the world of banking in India. The initiatives on the net banking platform (bank, mutual fund, demat account, etc) and 10-second loan approval initiative in personal loans have made its services even better. The digital application platform introduced for instant e-approval to retail loan applications allows customers to fill application forms online with help from a representative. The bank has also been single-mindedly focused on breaking into rural and semi-urban areas, which account for 60 per cent of India's population. The NPAs, at 0.25 per cent, are the lowest among all banks and reflect the strong appraisal processes followed by the bank.
"The changes in the operating model have brought in efficiencies in terms of faster turnaround and lower cost as transactions are processed concurrently rather than sequentially" Aditya Puri, MD & CEO, HDFC Bank
KOTAK MAHINDRA BANK
Most Future Ready Bank
The bank has aggressively scaled up its footprint with the acquisition of ING Vysya Bank, snapped up for $2.4 billion in an all-stock deal (Uday Kotak's own stake in the bank has fallen from around 40 per cent to 33.4 per cent).
In a single stroke, Kotak Mahindra Bank's balance sheet size has pole vaulted from Rs 95,430 crore to Rs 1,06,012 crore â?? it is now India's fourth largest private bank after ICICI Bank, HDFC Bank and Axis Bank. Also, the bank is known for its universal model. Kotak Mahindra Prime is the second-largest profit generator (Rs 507 crore in 2014/15) within the Kotak group.
Kotak Securities is one of the big names in the broking business with income close to Rs 1,000 crore and net profit of Rs 290 crore in 2014-15. Kotak Life Insurance is 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 to Rs 55,000 crore.
"We want to experiment. We want to learn. If I look at India from a five-year view, it's a great time to build businesses here. But, to succeed, banks not only have to be future ready, but also have to win the trust of their clientele for the long haul" Uday Kotak , Vice Chairman and MD, Kotak Mahindra Bank
Most Improved Bank, Best Bank - Mid-sized
Yes Bank has been upping the ante. Till recently, it was focusing on corporate and commercial lending that saw it rake up a balance sheet of Rs 1.36 lakh crore in 11 years. Now, to scale up its retail book, it is launching its credit card business, besides rolling out a fund management arm. It is also employing technology to reach the masses with innovative use of technology.
"We have practically 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
STATE BANK OF INDIA
Best Bank - Financial Inclusion
It has helped lakhs of people in rural India earn a living. Plus, it is using technology and banking correspondents to take services to remote areas. It has also become a serious player among banks in encouraging self-employment in rural areas through Rural Self Employment Training Institute. More recently, it was at the forefront of opening no-frills accounts under the Prime Minister Jan Dhan Yojana.
"It's not just about bringing more people into the banking system and giving them loans for income generation. We also have to see that they generate sufficient income to repay the loan" Rajnish Kumar, Managing Director (National Banking Group), SBI
Best Bank - Innovation
ICICI Bank is undoubtedly way ahead of the pack in innovation. Apart from digital, its innovation touches financial inclusion as well. ICICI became the first private sector bank in 2013 to introduce â??Branch on Wheels' that provides basic facilities to unbanked villages. A bank of the size and scale of ICICI Bank has managed an outstanding cost to income ratio. In fact, it is the best among large banks. ICICI Bank's cost to income ratio at 0.37 is better than the corresponding figures of SBI (0.50), HDFC Bank (0.45) and Axis Bank (0.41).
"In the youth segment, many are not eligible for credit cards. So, there is a lot of interest in a physical card, and we have seen good usage" Abonty Banerjee, General Manager and Head of Digital Channels at ICICI Bank
Best Bank - Small
RBL Bank has broken quite a few records over the past five years. The bank has a comfortable capital adequacy ratio of 13.13 per cent and one of the lowest net NPA s of 0.27 per cent. With 60 per cent branches in rural and semi-urban areas, it is well-suited to serve the bottom of the pyramid where these new banks are also expected to operate. In the past, it has hired a lot of talent from microfinance companies for self-help group, joint liability lending and micro-lending businesses.
Both financial inclusion/microfinance and agriculture businesses account for 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, is now also giving loans to mid-level companies as well as SMEs. It has also entered treasury, foreign exchange, and trade and cash management segments.
"It's a long journey, which needs a lot of hard work and sweat. It was clear to us that we were building an institution to leave behind some positive legacy" Vishvawir Ahuja, MD & CEO, RBL Bank
Best Foreign Bank - Large
The Indian unit of the bank stood out. It bucked the global trend to report an impressive performance â?? almost an outlier in Deutsche's global map. The numbers speak for themselves. A massive 93 per cent jump in profits to Rs 1,406 crore in 2014/15. The loan book increased by 25 per cent to Rs 36,138 crore. It also has the best asset quality at a time when banks in India are witnessing 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 other large foreign banks in India including Standard Chartered, Citibank and HSBC India. The bank has exposure to chemicals, metals, engineering and NBFCs.
"We will bring new products, technologies, risk management strategies, etc. Foreign banks are committed to India and will continue investing" Ravneet Gill, CEO, Deutsche Bank
Best Foreign Bank - Mid-sized
In the middle of a global restructuring exercise, Credit Suisse AG, India, is carving out a unique way to map its growth path. With a balance sheet of Rs 11,070 crore and just one branch in Mumbai, Credit Suisse is doing roaring business by servicing entrepreneurs and high-net-worth individuals Today, it offers banking, wealth management and investment banking services, along with its securities business in fixed income, equities and more.
"We can expand, but I don't think it is needed at the moment. Since the commencement of our bank in 2011, we have been adopting the strategy of growing cautiously" Mihir Doshi, Country Head, Credit Suisse AG