You are right but think that presently max retail business comes from traders and reatailers. and they still need branch near so they can deposit day to day cash and cheque to bank daily. they cant afford to call bank to pick up from them and deposit.
those tech savy people dont need branch and they transect online but thats too like duel edge swords , they are smart in investment and dont keep money idle in bank account also. so cheap funds comes only from old guys who dont like to shift or change in any past arrangement just for half percentage interest.
i myself have account opened in idfc but thats till they give higher interest. day they start reducing it i will quickly shift.
in our gujarati their is proverb"Gharak koi no sago nathi " same apllies very much in present cut throat competative world.
All banks have network effect, more you keep account with them more difficult it becomes to shift your account and you end up keeping atleast a minimum balance. I have Yesbank account opened with same reason but canāt close as it is now linked to multiple SIs and trading account.
why?
insider trade: Disposal of 131,000 equity shares worth Rs 55.09 lacs by trusts
insider trade: Disposal of 20,000 equity shares worth Rs 8.41 lacs by kmp
As per V Vaidyanathan, they will grow retail book from 30 to 70% and corporate/wholesale book from 70 to 0ā¦ Ultimately book will remain same after 3 to 5 years even if retail book grow at 25 CAGRā¦am I right?
Yesā¦i too wondered the same reading his interviewsā¦ The book value may not increase for the next 3 years
Donāt confuse Book Value with loan book. BV can increase despite stagnant book (loan book).
Rgds
RR
I guess they have implied this about infra book and not the wholesale or corporate bookā¦ plans to reduce infra book to negligibleā¦
They migh have nominal exposure to coroporates in future tooā¦ not large thoughā¦
can anyone confirm on this?
No he clearly said wholesale/corporate in his recent interview in Nepal so there is no doubt about itā¦
Here is the link of itā¦
Two important statement form lastest AR by Vaidyanathan
Plans: I have guided for the following
simple strategy. Grow CASA % from
10% to 30%, grow retail deposits
(CASA +TD) as % of total borrowings
from 10% to 50%, grow retail loan
book as % of total loan book from
35% to 70%, reduce infrastructure
loans from 22% to 0%, reduce Cost
to income ratio from 80% to 55%,
grow branches from 200 to 800,
grow NIM from 3% to 5%, all in
five years. In short, build franchise,
diversify liabilities, diversify assets,
improve margins. Itās that simple.
You will see us consistently delivering
on these fronts.
Our Customer Approach: It always
starts with the customer. I have made
it clear to all that we donāt want to do
anything that will hurt the customerās
interest in the course of scaling
up our Bank. The founding years,
which I call the next five years, are
particularly important, as the DNA
of what we establish will be hard to
correct later. We will make every effort
to sell the right products to customers,
avoid mis-selling, avoid selling such
products that make wonderful fees for
us but at the cost of the customerās
pocket.
Personally I think this is good 5years plan with long term thinking without shortcut
Letās hope for best as a shareholder
Thanks
Ashit
Saying is easy but getting it done is very difficulty as day by day banking will be crowded and more competitive. Hence, we have to take Vaidyanathan commitment with pinch of salt!
Almost all banks are trying to increase CASA and retails loans. Just listen to management of Federal Bank too. Yes Bank management too wants to move to retail majority. Then there are Banks like HDFC who have managed to scale CASA and retail- they of course have it in their DNA to increase it further.
I will track IDFC First just because Vaidyanathan have a proven record in setting retail banking first at ICICI and latter at Capital First.
Increasing physical infrastructure by 4x and reducing cost almost by halfā¦ It would be first of the kind defying Newtonās law of gravity ā¦ I am skepticalā¦
This is cost to income ratio so if one can increase income, cost relatively goes down
Absolutely true but if you read itās AR He has mentioned it under challengeās (as such itās good sign for me that he is discussing all our worries and taking all negative side of research report head on )
The Challenges: A number of research reports including those by reputed entities such as Credit Suisse, Deutsche Bank and Morgan Stanley have pointed out that the bank faces many uphill tasks on profitability and liabilities. I donāt deny these challenges, also thank them for their efforts to research us. For instance, Morgan Stanleyās report read āIDFC has one of the weakest retail liability franchises and one of the lowest share of retail loans among peers.ā CNBC says the issue of low CASA will be hardest to fix. Deutsche Bank says the bank has a large loan book at over 1,00,000 crore and low CASA of 6,500 crore. Negligible CASA will have a very long gestation period.ā āBuilding CASA will be a costly and long journey: Credit Suisseā Of course, we understand this issue, and we are determined to fix it. The only way to address this issue is to grow CASA faster than the growth of the loan book. Our liability products are already a hit in the marketplace and I think we will surprise you on the upside.
Thanks
Ashit
If Kotak with itās 811 can increase its CASA ratio to the current 55 % I think IDFC can also do it though it will be much more tougher.
Excerpt from ICRA report āGoing forward, the build-up in retail liabilities may take time even though the bank has achieved a reasonable
diversification of the loan book. Apart from the ongoing expansion of its branch network, the bankās ability to build up retail liabilities will remain key. The banks CASA witnessed a significant increase in CASA in Q4FY2019ā
Will take time but the CASA increase has begun. I have not invested in IDFC FIRST Bank ever but following closely. Sole reason being that Mr Vaidyanathan has excellent retail banking skills and past record. And retail banking has been IDFCās achilles heel for a long time.So, fingers crossed.
As part of their aggressive growth plans centered around increasing their retail book, helping them change their business mix from wholesale to retail banking, cross-sell products and improve profit margins.
IDFC First Bank turned to a world leader IT service provider and solutioning company to help in this journey with key business processes such as mortgage, auto finance, retail & small-size institutional loans and trade finance. They opted for Business Process Management and Enterprise Content Management solution to automate and streamline these processes. With this automation, IDFC will achieve better visibility of their processes and documentation, reduced manual re-work and improved operational efficiency while reducing time to market.
Source : Internal company communication of project winning company.
What is they acquire one of the old gen pvt sector banks, all come with excellent deposit franchise but not so good branding. Think of South Indian bank, Karnataka, Karur vysya, and many moreā¦
My guess is these banks should b an interesting piece in overall puzzle of all newly licensed banks.
Indiabulls with its offer for merger with Lakshmi villas bank is doing something similar.