‘ING Vysya will grow faster than the market and with better quality’

ING Vysya Bank’s MD and CEO Shailendra Bhandari says he never stops eyeing a bigger market share for the bank. He believes immediate opportunity lies in organic growth. In this interview with Neelasri Barman and Vishwanath Nair, he talks about the bank’s credit growth focus, cost efficiency measures and lending policies.

What is your outlook on lending rates and deposit rates?
We as a bank believe that there is strong chance that the Reserve Bank of India (RBI) will cut repo rates. The market will not drop base rate unless there is a strong policy signal. But once there is a strong signal, we believe shortly thereafter base rates will come down. In terms of deposit rates, recently most banks have increased short-term rates. This was just a smoothening of the yield curve. We believe this makes more sense than banks that had raised long-term rates. But these rates will also start easing. Our analysis is that the RBI will probably cut interest rates by 75-100 basis points in FY13. We would imagine that there should be a somewhat similar drop in lending rates.

What kind of credit growth and deposit growth you are expecting for the bank in FY13?
We do not give specific targets. But the guidance which we are giving is that we will grow faster than the market and we will do it with better quality. As on December 2011, on a year-on-year basis, the market was growing 16% in credit and we were growing at a little over 22%. In deposits, we were growing at the same pace as the market because liquidity was on the tighter side.

So you mean to say slowing GDP does not impact credit growth for your bank?
Slowing GDP does impact. High interest rates and slow economy always are a double whammy. But it has not impacted us as we do not lend to a lot of these sectors. But does that mean we will go and lend out stupidly? The answer is no.

In terms of credit growth what will be the focus area?
As of December 2011, 43% of our lending is corporate which is mainly large corporate because of the ING international connections. 31% is SME and 20% is consumer finance.

In a situation where many banks are shying away from lending to large corporates in order to improve their margins, you are still focusing on them. Why?
Yes, lending to large corporates is not necessarily a good idea because margins are low. Having said that, we must also say that a lot of large corporates don’t borrow as they are sitting on cash surplus. I am talking about the blue-chip companies. There is no credit cost and from them you get fee-based income and deposits. It is not easy to service blue-chips. We are able to do because we have international products and international connections. By and large, this is a segment where we are quite happy and we plan to continue with it.

In the retail segment, where will be your focus?
First will be the SME part of retail. Besides that, we have been traditionally very strong in home loans, we also have small business in commercial vehicles, personal loans, gold loans and we would continue to like those areas.

What steps is the bank taking in terms of cost efficiencies?
Our cost/income ratio used to be very high. It still needs to be improved. It used to be 80-90%. Now in the quarter ended December 2011, it is 57%. In the next few years, we want to be close to 50%. We are doing a variety of things to improve efficiency. Cost-cutting is not necessarily the best way to do it. You need to get better utilisation of existing infrastructure. We are looking at various ways of improving productivity which is transcending very well. Lot of our gains on cost/income is largely on account of productivity.

What is your outlook on current account and savings account (CASA) ratio growth?
Our CASA ratio is the highest among all south-based banks. As on December 31, 2011, it is 32.5%. I do not think any south-based bank has got a CASA ratio more than 30%. Having said that, liquidity is tight and keeping money idle is very costly. So CASA is under pressure for the time being. But we do believe that this is cyclical and once interest rates start moving down, CASA will again start going up in a very healthy manner.

How did you manage to keep your non-performing assets under control?
Good credit, ruthless recovery and we have one of the highest provisioning cover in the industry. 

Are you looking at inorganic growth opportunities?
We would like to see a greater market share. Private banking market share is roughly 18% of the total banking industry and we would be having about 4-5% of private banking share. As of now, we believe our immediate opportunity lies is organic growth.