What’s Profit, What’s Loss

It’s hard to hammer out a consensus on any issue these days — for validation, just glance at the headlines in newspapers (of all hues) or at the “breaking news” ticker across television screens. Yet even in this cussed state of national affairs, you will get most to nod in agreement when it comes to our banks — they (particularly state-run banks) are under severe stress; it will take time to get out of this very tight spot. And it’s under this long shadow the jury meet for the Eighth Edition of the BW Businessworld Best Banks’ Survey 2015 with the Knowledge Support provided by PwC got underway.

Now even at the best of times, it’s an unenviable enough task to pick the best (and by extension, the not-so-good) among banks. Its been hard to answer a question that’s frequently popped up in the past: Is a bank as good as it publicly declares itself to be? That’s been reversed — as in to mean, is a bank only all that bad? Of course, our survey is not premised solely on the methodology; it’s subject to scrutiny by an external jury that weighs the variables — uniformity of credit and deposit growth, market perception, management and corporate governance, the base-effect of size on growth parameters, growth versus risk, and efficiency in the use of capital. But in these gloomy days, financials, too, are under the lens — dud-loan figures are widely perceived as “under reported”. So what’s fact, what’s fiction?

If that’s not a challenge, we had a task on our hands to put together a jury as well. The survey has always got jurors from a wide pool in India Inc., so as to get a comprehensive view on our banking sector. Now given the mood in India Inc., it needs some persuasion to invite a sensible lot to offend banks! It’s an exaggeration sure, but as borrower you can’t have knocked on banks’ doors to restructure your loans (or worse, have been put down as dud) and then offer your views on them. A constituency that always had a voice on the jury was state-run banks through a recently retired chairman and managing director. We had to give it a go-by this time as the tenures of most who bid adieu are up for judgement.

The jurors who were brave enough to be counted for the current edition of the survey were Arun Duggal, chairman, ICRA; Dina Wadia, managing partner, J. Sagar & Associates; P. Ganesh, CFO & company secretary, Godrej Industries; S. Nagarajan, CEO (India), CDC Group (of UK), and Vimal Bhandari, MD & CEO, Indostar Capital.

Right up, an issue that was debated at some length was whether shareholder value was captured — at times hidden in the “captives” of banking conglomerates. A voice pointed out that it’s necessary as otherwise, winners will continue “to be from a pool of seven” or the usual suspects. That’s been the bane of the Indian banking system — the two-decade plus reform road may have increased competition, but the gap between the good and the laggards have widened. We agree that shareholder value has to be taken cognisance of, but one can’t also get away from the fact that we have not yet set food into the holding company regime. But the survey has taken the suggestion on board.

The other is an existential dilemma. State-run banks have to carry the burden of several social programmes, which their private and foreign-run brethren don’t. Nor are their wallets compensated for it — it’s been highlighted by Mint Road too with reference to the Jan Dhan Yojana. Branches are opened all over the place, but many suffer from the commercial viability standpoint. The limited tenures of bank heads in the state-run sphere and “butting into” matters administrative and credit. All these issues have been captured threadbare in the P. J. Nayak Committee’s Report. And for his yeoman service to the banking world. P. J. Nayak was the unanimous choice for the ‘Lifetime Achievement Award’.

It was felt that among “large-sized” banks, SBI needs to be recognised for its unique place. It’s not only the poster-child among the state-run, but to steer it requires some taking. It’s managed to keep its dud-loans under control (for a bank of its size); it leads in the number of mobile banking transactions; its leadership has streamlined decision making — not the easiest of tasks even in a leaner entity. SBI was ran close by the perineal favourite, HDFC Bank, which has been on the podium many times over (it was in pole-position in the survey based on financials; in second place was ICICI Bank). But the jury felt that SBI is most worthy of the award for the ‘Best Large-size Bank’ for the reasons cited earlier; and for her role at the helm of the bank’s affairs, chairperson Arundhati Bhattacharya was conferred the ‘Banker of the Year 2015’. As for the ‘Fastest Growing Large-Size Bank’, it was HDFC Bank. No ifs and buts out here.

The fight for the ‘Best Medium-size Bank’ was between YES Bank, Kotak Mahindra Bank (KMB) and IndusInd Bank. It was tight. KMB will take time to digest its buyout of ING Vysya Bank — there are legacy issues. Both YES Bank and IndusInd Bank were worthy contenders, but the jury picked KMB as the winner, followed by IndusInd Bank and YES Bank. As for the ‘Fastest Growing Medium-size Bank’, YES Bank topped, next were IndusInd Bank and KMB. What’s clear is that for the two awards in this weight category, it will be a slugfest down the line. It also needs to be remembered that KMB is the only one to have gobbled up a bank among the trio!

In the categories of the ‘Best Small-size Bank’ and the ‘Fastest Growing Small-size Bank’, it was City Union Bank (CUB) and RBL (the erstwhile Ratnakar Bank). CUB pipped Federal Bank (the topper in numbers) and DCB; RBL was a straightforward winner; Laxmi Vilas Bank and DCB took the next spots. As for the ‘Best Foreign Bank’ and the ‘Fastest Growing Foreign Bank’ — a class we introduced last year given the peculiarities faced by this set of players, the jury went for Citigroup — the only full-services entity which has not hiccupped. Next came Deutsche Bank and Barclays Bank. The jury felt that the award for the fastest growing among them was not warranted — none had a great run-rate.

That’s the consensus the jury arrived at!

Raghu.moh@gmail.com; @tabonyou

(This story was published in BW | Businessworld Issue Dated 08-02-2016)