Banks amp up their vehicle finance portfolios in Q2

Other than these banks, some banks partnered with vehicle manufacturers to boost their portfolio.

Some major banks aggressively grew their vehicle finance portfolio in the July-September FY24 quarter, a Moneycontrol analysis of six banks showed.

These banks include public sector lenders State Bank of India, Uco Bank and Indian Bank, as well as private sector lenders ICICI Bank, Axis Bank, and IndusInd Bank.

Growth trends

Axis Bank’s vehicle finance portfolio grew 22 percent in Q2FY24 against 11 percent growth in Q2FY23. ICICI Bank's portfolio grew 19 percent against 12 percent growth a year ago. Among public sector banks, UCO Bank’s vehicle finance portfolio in the Q2FY24 quarter grew 28 percent compared to 16 percent growth in Q2FY23.

IndusInd Bank’s YoY growth in Q2FY24 was at 22 percent against 13 percent growth in Q2FY23. SBI grew 21 percent versus 16 percent, while Indian Bank surged 36 percent against 27 percent growth in the same period.

Strong segments

The two-wheeler and commercial vehicle segments worked well for banks, the data showed.

For example, ICICI Bank’s two-wheeler vehicle segment grew to Rs 2,215 crore in the July-September FY24 quarter from Rs 1,772 crore in the corresponding quarter last year. Similarly, IndusInd Bank’s portfolio jumped to Rs 4,923 crore in Q2FY24 from Rs 4030 crore, recording a 22 percent increase. Compared to the same figures in Q2FY23, the bank saw a 15 percent contraction in the two-wheeler financing business.

Sumant Kathpalia, managing director and chief executive officer (MD and CEO), IndusInd Bank, said that the bank’s diverse vehicle finance portfolio has been performing well. “The diversification initiatives have been playing out well in vehicle finance. Our light commercial vehicles, cars, utility vehicles, and construction equipment portfolios have crossed the 10,000 crore loan-book mark, whereas tractors are almost there,” Kathpalia said on the analyst call after announcing the Q2FY24 results.

In commercial vehicles, ICICI Bank saw 12.3 percent growth in Q2FY24 compared to 5.6 percent in the corresponding quarter last year. In the bank’s analyst call, Anindya Banerjee, chief financial officer (CFO), said that the commercial vehicle segment has shown double-digit growth compared to single-digit growth previously.

“Commercial vehicles, which were flat or growing just about in single digits for a long time, this quarter, the year-on-year growth is more like 14 percent,” Banerjee said.

Overall industry numbers

On October 16, automobile industry body Society of Indian Automobile Manufacturers (SIAM) released the latest numbers for vehicle sales in September.

In a press release, the industry body showed that two-wheeler sales in September stood at 17.49 lakh units compared to 17.34 lakh units in September 2022. The same stood at 15.28 lakh units in September 2021.

Passenger vehicle sales were at 3.61 lakh units this September compared to 3.07 lakh units in the same month last year and 1.60 lakh units in September 2021. Sales of three-wheelers were at 74,418 units versus 50,626 units in September 2022 and 29,185 units in September 2021, SIAM data showed.

Partnerships

Other than these banks, some banks partnered with vehicle manufacturers to boost their portfolio.

For example, CSB Bank partnered with commercial vehicle manufacturer Ashok Leyland in August. Suryoday Small Finance Bank partnered with OTO, a two-wheeler commerce and financing platform, in September, to provide two-wheeler financing services. IDFC First Bank partnered with Maruti Suzuki to offer personalised finance options across new-car loans, pre-owned car loans, and commercial loans.

Meanwhile, Kotak Mahindra Bank plans to boost its portfolio through partnerships and digital financing services, said Shripad Jadhav, its president and head for tractor and farm equipment, crop loans and gold loans.

Going ahead, experts said that the festive season and demand from tier 2 and tier 3 cities will boost the portfolio’s growth.

“In the third and early fourth quarter of a year, due to the festive season, banks see major growth in their vehicle finance as people … buy more vehicles. This growth is majorly seen in two-wheelers and other personal vehicles,” said Vijay Singh Gaur, Lead Analyst, BFSI, CareEdge.

Kathpalia added: “The second half of the year is seasonally better for vehicle businesses.”