It is tough to be a banker these days. Average demand for bank loan remains modest, while large corporate borrowers find it difficult to repay earlier loans, let alone think of seeking fresh lines.
Uday Kotak is, however, doing his job with much panache. In his thirtieth year in the financial services industry, of which a dozen-odd years were spent in driving Kotak Mahindra Bank’s (KMB) growth, his relaxed smile offers hope to many of his clients. It’s not without reason. He is a man of solutions; a man in whom large and even small corporates confide knowing they would get the right answers. Brought up in a cotton trader’s family, the 56-year-old executive vice-chairman and managing director of the bank, has a natural talent for managing money, which is evident in his win.
KMB has been adjudged the Best Medium Size Bank in the BW Businessworld Best Banks Survey 2014-15.
In the past few years while other banks grappled with issues of growth and bad loans, Kotak added strength. In a deal that many coveted, Kotak catapulted his bank, which sprouted from a finance company in 2003, closer to the big three private sector rivals of illustrious parentage and posted impressive growth on most parameters. Kotak Mahindra’s acquisition of ING Vysya Bank helped it evolve as a true pan-India player. The bank expects complete integration by 1 April 2016, and will then focus on realising full benefits from the synergy of the merger.
“India is in a sweet spot, and compared to many other parts of the world is extremely well-poised. However, deflationary pressures, pressures on a lot of leveraged corporates and on the banking system will make it a pretty tough grind from here in the short run,’’ says Kotak.
Between 2013 and 2015 KMB reported about 35 per cent growth in demand deposits, the fastest in the category, though increase in advances was more conservative at 17 per cent.
The bank, which started as a finance company in 1985, initially focused on capital markets as India liberalised its economy. “Around the time when we got the banking license in 2003, capital markets business contributed about 65-70 per cent to the group’s profit and loss. Thereafter, the bank started adding a lion’s share to the growth. Till about two years ago, the bank’s share in the group’s profit and loss was about 85 per cent,” says Kotak.
Its inherent banking capabilities have ensured the bank a place among the top five investment banks in terms of value in the year 2015.
“There will be some short term glitches (for Indian economy), but let us not forget that this is a marathon and not a sprint,” says Kotak. “Our outlook is positive. We are well placed to participate in this growth and grow along as well,” he adds.
On the parameter of size, the bank has leapfrogged to Rs 1,06,012 crore as of March 2015 from Rs 84,000 crore in March 2013. Its key position in various segments has helped it do better than its competitors. Besides its key strength in capital market related activities including mergers and amalgamations, the bank has steady presence in funds management, life insurance, private equity, real estate, international operations, brokerage and vehicle financing among others.
Kotak likes India’s consumption story, and sees urban consumer driving demand in future. Financial savings are getting higher fillip compared to real estate and gold.
“Cars, homes and small and medium enterprises in urban India will continue to be the bedrock of our growth,’’ says Kotak. “Rural India on the other hand, is a bit slow, but will bounce back with the passage of time and corrective policies by the government.’’
Over the months, as part of its efforts to diversify and cement its presence as a financial services supermarket, KMB recently acquired stakes in the Multi-Commodity Exchange, Godrej Properties, and Institutional Investor Advisory Services India, among others. It expects to add presence in general insurance following a recent approval from insurance regulator IRDA. In the life insurance business, the bank posted 90 per cent growth from the individual segment compared to industry average of 15 per cent.
Greater access to the more conservative and secure southern markets as a result of the merger with ING Vysya should help KMB in making more well-balanced inroads into new lines of businesses, and give it stronger sustainability. Kotak exudes optimism saying the banking group is well positioned to grow from its presence across segments.
Yet, in terms of its non-performing assets (NPAs), the bank will take some time to tide over. Its gross NPA has risen to 1.69 per cent from 1.27 per cent in 2013, while it may look like some jump, it is among the lower ones in the Indian banking sector.
For now, KMB has put in place the building blocks for the future.
sumit@businessworld.in; @mediasumit
(This story was published in BW | Businessworld Issue Dated 08-02-2016)
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