CASA growth: HDFC Bank clear leader, ICICI Bank claws its way back

By: | Published: July 25, 2016 6:10 AM

We review current account, savings account (CASA) growth factors/drivers and the market share pattern with updated FY16 numbers.

We review current account, savings account (CASA) growth factors/drivers and the market share pattern with updated FY16 numbers. While the CASA share loss for PSU banks vs. private banks was expected, we believe it was a material loss in CA market share for smaller PSUs. On SA, the shift was slower. Overall, HDFCB remains the clear winner with ICICI clawing back some lost ground in the past two years and Axis stabilising after a downward normalisation in CASA growth in FY15. SBI is the only PSU bank which is able to defend its share, while the share loss is the highest for BOI among covered PSUs.

Market share shift —Private banks gaining gradually in SA, but have complete dominance in CA deposits now

On CA deposits, the top-6 private banks contribute 60% of the incremental CA over FY14-16 vs. 45% over FY10-14, and 30-35% over FY06-10. While all PSU banks are losing share, smaller PSUs have had almost no CA growth in the past three years, and even ex-SBI, large PSUs have lost significant share. On SA deposits, the shift remains more gradual, with the top-6 private banks garnering 27% of the incremental SA deposits, with top PSU banks ex-SBI losing share from 25% in FY12-14 to 21% in FY14-16. From a P&L perspective, the only saving grace for PSUs is the overall deposit CAGR (ex-SBI) at 5% has been slow and the share loss has not translated into a lower CASA ratio, but this will impact when growth picks up again.

hdfc-bank

HDFCB a clear winner; SBI stands out among PSU banks

HDFCB remains the clear leader among the three large private banks. Its CA share has been 20% of the incremental CA over FY14-16 and its incremental CA share has been higher than SBI over FY12-16 (commendable given that SBI is +3x of HDFCB’s size). The SA CAGR of ~20% over FY14-16 is the highest among all large banks. Axis Bank’s CASA trend is normalising with significant growth, especially in CA over FY06-13 and a dip in the share in FY15. ICICI Bank has been clawing back its lost ground in the past two-three years. While FY08-13 looked like a period of CASA ratio improvement, the bank actually lost relative share due to balance sheet consolidation. After lagging Axis from FY08-13 on incremental CASA share, it is now ahead of Axis, which should have been the case given its larger size. Kotak/IIB/Yes have been increasing share, especially on SA. ING’s integration makes it difficult to comment on the incremental trends. IIB’s CA performance is superior to Yes Bank’s. Among PSUs, SBI has been able to maintain its CASA share. Most other PSU banks have lost significant CASA share. Among covered PSUs, Union/PNB have lost less share than BOI. Regional banks on an aggregate have just been able to maintain their CASA share in spite of PSUs losing share in the past 10 years and the same trend continues.

HDFC Bank

The bank’s CA share has been 20% of the incremental system CA over FY12-16 vs. <10% in the decade before. The SA growth of 20% CAGR over FY14-16 is also the highest among all large banks. The underlying momentum in its NEFT/RTGS market share (13-20%) indicates that HDFCB will continue to build on this gain and makes us confident that multiples can remain high for the next three-four years.

ICICI Bank

While ICICI Bank’s CASA ratio had improved after the global financial crisis (GFC) in 2008, it was largely due to slower balance sheet growth, as until FY13, ICICI was losing incremental CASA share rather than gaining share as reflected by its CASA ratio increase (as a result of slower balance sheet growth). The incremental growth, especially in SA, has picked up over the past two-three years. Also, with overall balance sheet growth improving, we believe CASA momentum is returning with ICICI’s CASA share higher than Axis Bank’s now.

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