Kotak Bank wants to raise corporate loan share to 40%
MUMBAI: Kotak Mahindra Bank, owned by India's richest banker, has harnessed its two-year-old acquisition of ING Vysya Bank to expand its corporate loan book, snatching business from state-run lenders that are battling to arrest a protracted run of asset-quality slippage.
The Mumbai-based lender, owned by billionaire Uday Kotak, is aiming to increase by a third the share of corporate loans in its consolidated loan book to 40% in the next three years, KVS Manian, president, corporate and investment banking (CIB), said in an interview.
In April 2015, after the acquisition of ING's business in India, Kotak Mahindra merged its CIB units to allow the bank to approach the country's top 30 groups in an integrated manner. That plan has worked for the South Asian nation's fourth-big gest private lender by assets. “We have got far more mandates and banking penetration has gone up. In these top 30 corporate groups, our growth in income was anywhere between 50% and 100% in the past two years. The CIB as a model has been successful, and we are now looking to expand to 40 corporate groups over the next year,“ he said.
Manian said Kotak has been successful in acquiring at least 500 largeand medium-sized new clients in each of the last three years, adding about 700 new companies from conglomerates such as the Tata or Aditya Birla groups and wresting market share from state-run banks.Companies with annual revenue . 250 crore are defined of at least ` as large or medium. “Our share will mostly come (at the expense of) the public sector because these banks don't have the capital for growth. The government is infusing capital selectively and very few can get capital from the markets. That will become a constraint for growth and, therefore, they will cede clients, not to mention the low quality of assets that will force them to exit from some current assets to reduce risk weights,“ he said.
Kotak's client additions have helped lower risks and bolster shareholder returns. “Our risk weighted assets have fallen from 65% to 53% now on the corporate side because we have focused on better-placed and larger corporates. So, we have grown faster on less risky assets. This business used to earn an RoE (re turn on equity) of 12% to 13%. This year we will do 21% by maximising non-capital based in come, such as fees, transaction banking, and trade,“ Manian said.
The Mumbai-based lender, owned by billionaire Uday Kotak, is aiming to increase by a third the share of corporate loans in its consolidated loan book to 40% in the next three years, KVS Manian, president, corporate and investment banking (CIB), said in an interview.
In April 2015, after the acquisition of ING's business in India, Kotak Mahindra merged its CIB units to allow the bank to approach the country's top 30 groups in an integrated manner. That plan has worked for the South Asian nation's fourth-big gest private lender by assets. “We have got far more mandates and banking penetration has gone up. In these top 30 corporate groups, our growth in income was anywhere between 50% and 100% in the past two years. The CIB as a model has been successful, and we are now looking to expand to 40 corporate groups over the next year,“ he said.
Manian said Kotak has been successful in acquiring at least 500 largeand medium-sized new clients in each of the last three years, adding about 700 new companies from conglomerates such as the Tata or Aditya Birla groups and wresting market share from state-run banks.Companies with annual revenue . 250 crore are defined of at least ` as large or medium. “Our share will mostly come (at the expense of) the public sector because these banks don't have the capital for growth. The government is infusing capital selectively and very few can get capital from the markets. That will become a constraint for growth and, therefore, they will cede clients, not to mention the low quality of assets that will force them to exit from some current assets to reduce risk weights,“ he said.
Kotak's client additions have helped lower risks and bolster shareholder returns. “Our risk weighted assets have fallen from 65% to 53% now on the corporate side because we have focused on better-placed and larger corporates. So, we have grown faster on less risky assets. This business used to earn an RoE (re turn on equity) of 12% to 13%. This year we will do 21% by maximising non-capital based in come, such as fees, transaction banking, and trade,“ Manian said.
