Large banks target double-digit growth in corporate loan book

Large lenders including State Bank of India (SBI), Bank of Baroda (BoB), HDFC Bank, ICICI Bank, among others are confident of growing their corporate loan book in double digits in the second half of the financial year, as working capital demand and scope of further cross sales from clients’ remains strong, senior bankers say.

State Bank of India (SBI) Chairman Dinesh Khara recently said the lender has about Rs 3.4 trillion of corporate loans in pipeline and the segment would grow “at least” in the lower double-digit number going ahead. SBI’s total corporate loans accounted for 34% of overall advances and stood at Rs 9.77 trillion as of September end, up 7% year-on-year (YoY).

“In the term loans segment, we have seen the utilisation has improved by almost about 100 basis points (bps) in this quarter (Q2) as compared to previous quarter. The utilisation of the working capital also has improved in this quarter,” he said, adding that going ahead things will improve further.

Bank of India MD, CEO Rajneesh Karnatak said the lender expects over Rs 50,000 crore of corporate loan disbursals in the second half of the year. These include sanctioned loans where disbursement is pending, sanctioned loans where the documentation is pending, and corporate loans where in-principle approval has already been given by the bank.

While the lender is not approaching certain transactions where the interest rates are too low, he said: “there are good sanctions in place an appetite for loans in corporate sector. We just have to pick and choose.”

Sectors such as infrastructure, production linked incentive (PLI) linked sectors, food processing, textile, sugar, textile, and chemicals are showing higher appetite for credit, Karnatak said. Bank of India’s overall corporate loans stood at Rs 2.01 trillion as of September 30, up 7% YoY.

HDFC Bank, too is upbeat about growing its corporate loan book, along with other loan segment, going ahead, MD & CEO Sashidhar Jagdishan said in an analyst call.

“We have also accreted on an apple-to-apple basis, Rs 1.1 trillion (of loan growth) during this quarter (Q2). These are high-quality assets, whether it is corporate, whether it is commercial rural banking, MSME book or the retail book,” he said. HDFC Bank’s corporate loans rose 6% quarter-on-quarter (QoQ) during Q2 to Rs 4.28 trillion as of September 30.

“Even on such a large scale the bank will have the energy to continue to grow at a pace that we have done in the past even on such a larger book,” Jagdishan said.

Focus on cross sell

While lenders earlier pre-dominantly focused on just financing corporates, they are also focusing on more fee income from such entities through cross selling.

For instance, ICICI Bank CFO Anindya Banerjee said the lender has now created more than 20 industry-specific “STACKs” which provide purpose-based digital solutions to corporate clients and their ecosystems. ICICI Bank’s “Trade Online” and “Trade Emerge” platforms have enabled customers to perform most of their trade finance and foreign exchange transactions digitally.

“About 71% of trade transactions were done digitally in Q2 of this year. The volume of transactions done through Trade Online and Trade Emerge platforms in Q2-2024 grew by 29.7% year on-year,” he said.

Another public sector major BoB is also focusing on increasing fee income from corporates, MD & CEO Debadatta Chand said.

“The aspect of fees that we have seen this year is particularly on the large corporates, in the mid corporate, we implemented the concept of relationship manager,” he said. The job of relationship manager for mid-corporate clients is to measure share of wallet of all such accounts and try to leverage the data by offering other non-core income products.

“We are pursuing the cash management services not only for the corporate sector, but mid corporate accounts, and also MSME accounts. We are trying to have a culture of sales. We are moving from the transactional banking to the engagement or relationship banking,” he said.

Table: Banks’ corporate loan book