FE Best Banks Awards: IndusInd Bank’s Romesh Sobti gets Banker of the Year award

By: | Published: August 30, 2016 6:34 AM

There’s nothing harder than turning around a business with a bad legacy. But Romesh Sobti has done just that.

IndusInd Bank q2Taking charge at IndusInd Bank in 2008, when the lender was not in the best of health, must have been a difficult call for a banker with a foreign bank.

There’s nothing harder than turning around a business with a bad legacy. But Romesh Sobti has done just that.

Taking charge at IndusInd Bank in 2008, when the lender was not in the best of health, must have been a difficult call for a banker with a foreign bank.

But over the last eight years, with the backing of the owners, Sobti has transformed the lender into a fine organisation. That’s reflected in the confidence investors have shown: From just R4,100 crore in 2008, the lender’s market capitalisation is now nudging R70,000 crore.

The year 2014-15 was a particularly good one for IndusInd with net non-performing assets at just 0.3%. By March 2015, the stock was trading at 4.1 times one-year forward book value and at a premium to peers.

The balance sheet has got cleaner over the years and is growing at around 25% annually; it should cross R2.5 lakh crore in the next three years, more than doubling from current levels.

The acquisition of the loss-making credit cards portfolio from Deutsche Bank has been turned around and the portfolio is growing smartly; it will cross R1,000 crore by March 2017.

The strategy is a prudent one: Not to lend against the card but to get people to spend.

It’s also meant to help enhance the bank’s brand, which is why Sobti has tried to make sure high-profile customers stayed on.

He’s clear the brand-building strategy must focus on products and propositions rather than on the bank itself and has rolled out a suite of products to woo customers. All this with the limited resources at his disposal.

Although IndusInd may not yet be a full-fledged high-street brand like ICICI Bank or HDFC Bank, it should get there soon.

Analysts are impressed with the superior execution, strong return ratios and the ability to scale up given adequate capital.

What’s important is that the loan book has been gradually de-risked over the years with the over-dependence on vehicle financing, which accounted for 60% of the portfolio, now a thing of the past.

That has helped rein in gross NPAs at around 1%.

The bank has been able to raise funds at good prices and the strong liability franchise, with a high share of current and savings accounts, allows it to earn a good spread in the region of 3%.

The bank’s assets stood at R1.40 lakh crore at the end of March 2016, with loans clocking a 20%-plus growth in each of the last five years; in 2015-16, retail disbursements grew over 30%. That is a stupendous turnaround.

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