Superstars of retail banking! Do you own them?

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Superstars of retail banking! Do you own them?

Moneycontrol picks up a few banks which have seen significant growth in retail credit in the three-month ending June 2006 and analyses them on the basis of current price-to Book Value versus Sensex's P/BV .

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Kotak Mahindra BSE | NSE 31/05/12 Are Mutual Funds betting on Kotak Mahindra? Other Stocks in this news State Bank of India | Bank Of Baroda | Centurion Bank of Punjab | State Bank of Mysore | Axis Bank | HDFC Bank | Vijaya Bank | Allahabad Bank | Andhra Bank | Punjab National Bank | Dena Bank | ICICI Bank | Yes Bank |

The red hot Indian banking industry is witnessing an impressive and aggressive growth in retail. With consumer demand for retail products, like housing loans, education loans, personal loans and credit cards on the rise, the banks are vying with each other to offer the best of retail products and services at affordable cost and convenience. This has given birth to unprecedented demand for credit over the past two fiscals, which culminated in a steep rise in the country's credit-to-GDP ratio. In absolute terms, the volume of credit nearly doubled between FY03 and FY06. In 2005-06, 27% of the growth in credit consisted of retail credit, of which 52% was towards housing loans.

In 2005, the total asset size of the Indian retail banking industry grew at a rate of 120% to $66 billion. At present, the retail banking sector is expected to grow at a rate of around 30%, with focus on mortgage finance, personal loans and wealth management. Therefore, banks are realizing the high potential of this sector and realigning theit focus.

Incidentally, this growth in retail banking sector has helped in the growth of the overall banking sector. The retail banking industry in India is likely to reach a value of $300 billion by 2010. 

Moneycontrol picks up a few banks, based on their role in retail credit in the three-month ending June 2006, and analyses them on the basis of current Price-to Book Value versus Sensex's P/BV .

 Major Players in Retail Banking Industry

Bank of Baroda : The bank has embarked upon a technology-enabled business strategy to transform itself into a sales and service retail organisation. Through its initiatives, the bank has set targets in retail for the year 2006-07 to bring it to a level of minimum 26% of total credit. At Rs 238.50, the stock is trading at P/BV of 1.07 against Sensex's P/BV of 4.46.

Punjab National Bank : The bank's retail credit had grown by 48.9 per cent to Rs 18,180 crore at the end of June 2006 from Rs 12,206 crore a year earlier. The PNB stock, at P/BV of 1.64, is trading at a discount to Sensex's P/BV 

HDFC Bank : At P/BV of 4.57 times, this stock is trading a shade above P/BV of Sensex, which is 4.56.

UTI Bank : This stock, available at a price of Rs 348.45, is trading at P/BV of 3.46. UTI Bank is one of the most aggressive players in the private sector banking industry. It has nearly doubled its share in non-food credit over the last 6 years from 0.9% in FY00 to 1.7% in FY06. The bank is currently focusing on the retail segment to fuel growth and is witnessing growth in retail advances combined with a larger contribution of demand deposits to total deposits. The board has recommended a dividend of Rs 3.5 per share.  

ICICI Bank : The largest retail banking entity in the country is trading at 2.36 times P/BV. While a change in the accounting policy has safeguarded its NIMs, a fall in credit deposit ratio and incremental slippages in retail assets signal caution. The growth in fee income and international business, however, continue to remain the key profit drivers.

Yes Bank : The youngest player in the Indian private banking sector has reported comfortable credit to deposit ratio in its second year of operation. It is available at P/BV of  4.73 which is above P/BV of Sensex.

In addition there are HSBC Bank, Kotak Mahindra Bank , Citibank, Standard Chartered and ABN Amro, which have a very strong focus in retail banking.

-By Jhini Sinha Phira