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MOSL: FINANCIALS-The rising significance of liability franchise-Version 2.0; Private banks strategically expanding presence in SA rich states

Financials: The rising significance of liability franchise: Version 2.0; Private banks strategically expanding presence in SA rich states

 

• In our earlier report on liability franchise published in Mar'19 - '', we highlighted how the importance of a strong liability franchise will increase as new universal banks and SFBs aggressively chase deposits to drive business growth. We had also argued that unlike the historical trend, M&A activities in the BFSI space will be incrementally driven by the importance of liability franchise.
• In this note, we dig deeper to understand the trend in deposits build-up across geographical regions, population types and the branch expansion strategy being followed by different lenders. The key takeaways are: (a) Over the past decade, the Western region's market share in total deposits has declined 532bp to 25.6%, but gains were witnessed in the South (200bp), Central (210bp) and the East (200bp). (b) In SA deposits, the South and Central regions have been witnessing strong traction (~43% of incremental SA over the last decade). (c) Among states, Tamil Nadu, Haryana and Rajasthan are gaining SA market share, growing at 18% CAGR (over the past five years) and emerging as the new bastions of incremental SA growth. (d) Private Banks aggressively expanded their branch presence in SA rich states; since FY15, almost 58-75% incremental branch expansion of the top-6, large private banks were in the top-10 SA states. Consequently, about 63-73% of their branch network is present in the top-10 SA states.