EUR 120.00 For Business Accounts Only

MOSL: Morning India (20/June/19): 1. Financials (Liability franchise – Version 3.0: Branch expansion back in focus); 2. HDFC; 3. Voltas

MOrning India (20/June/19): 1. Financials (Liability franchise – Version 3.0: Branch expansion back in focus); 2. HDFC; 3. Voltas

 

Today’s top research theme

Financials: Liability franchise – Version 3.0; Branch expansion back in focus

• In this note, we assess the productivity gains achieved by different banks as they build a strong liability franchise. KMB is a clear outperformer on that front (SA per branch improved to INR531m in FY19 from INR110m in FY15), followed by HDFCB and ICICIBC.
• With credit growth in throes of revival now, deposit growth has consistently lagged loan growth by an average of ~460bp since Mar’18. Against this backdrop, private banks have highlighted the need to realign their branch expansion strategy.
• We further analyzed region-wise SA build-up composition of branches for major banks. We note that private banks have low branch presence in Bihar/West Bengal (even though these are among the top-10 SA states). Thus, these regions have the potential to emerge as the new bastions for branch expansion.

Piping hot news

US Fed leaves interest rate unchanged, signals cuts possible later this year

• The Federal Reserve indicated a readiness to lower interest rates for the first time in more than a decade, citing “uncertainties” in the outlook that have increased the case for a cut as officials seek to prolong the near-record U.S. economic expansion. While Chairman Jerome Powell and fellow policy makers left their key rate in a range of 2.25% to 2.5% on Wednesday, they dropped a reference in their statement to being “patient” on borrowing costs and forecast a larger miss of their 2% inflation target this year…