Mumbai: As the curtains draw down on a year that saw a shake-up in the private banking space, 2019 promises to be a year of redemption and repair. A new set of leaders will assert its authority at ICICI Bank Ltd, Axis Bank Ltd and Yes Bank Ltd next year. While Sandeep Bakhshi has replaced Chanda Kochhar at ICICI Bank, Shikha Sharma of Axis Bank will pass on the mantle to Amitabh Chaudhry in January and Yes Bank is expected to appoint Rana Kapoor’s successor by the end of next month.

With three of the leading private banks undergoing a leadership transition, it will be interesting to see the change in strategy and execution. Mint’s analysis of the transition period and access to discussions at these banks shows that it will be back to the basics: focus on quality, bottom line, technology, people and processes.

ICICI Bank CEO Sandeep Bakhshi’s top priority will be to restore the bank’s credibility, which took a beating due to the Chanda Kochhar controversy. Photo: S. Kumar/Mint
ICICI Bank CEO Sandeep Bakhshi’s top priority will be to restore the bank’s credibility, which took a beating due to the Chanda Kochhar controversy. Photo: S. Kumar/Mint

Bakhshi’s top priority will be to restore ICICI Bank’s credibility, which took a beating after former chief executive Kochhar was forced to exit because of allegations relating to violation of corporate governance. That said, during the September quarter, ICICI Bank swung to a profit after reporting a historic loss in the June quarter.

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The new CEO is focused on the bottom line. “Mr Bakhshi keeps reminding us to focus upon two important things," said Sandeep Batra, president, ICICI Bank. “First, improve core operating profit further through granular and risk-calibrated business growth. Second, make delivery more seamless and frictionless by decongesting processes and appropriately empowering teams."

As the bank shifts its strategy to target highly rated borrowers, Batra believes that there has always been a trade-off between the quality of customers and the impact on a bank’s net interest margin (NIM). “However, we are not looking at NIM on a stand-alone basis. We are focused to give better value to our shareholders," said Batra.

The bank had started changing its strategy under Kochhar. It reduced the corporate loan exposure on its books to 25% of its total loan book, while increasing the retail loan exposure to 57%.

Bakhshi is acquainted with the bank’s culture and processes. The institution, therefore, is unlikely to see a radical change in strategy.

That, however, may not be true of Amitabh Chaudhry who will take charge at Axis Bank after having spent eight years at HDFC Standard Life Insurance Co. Ltd. Chaudhry’s exposure to technology through his business process outsourcing days at Infosys Ltd, combined with his knowledge of retail financial products through HDFC Standard Life, is expected to give the bank a much-needed facelift and the retail engine that it lacks.

Amitabh Chaudhry’s entry into the Axis Bank corner room is likely to be accompanied by the induction of some close associates from the insurance industry. Photo: Mint
Amitabh Chaudhry’s entry into the Axis Bank corner room is likely to be accompanied by the induction of some close associates from the insurance industry. Photo: Mint

Chaudhry’s focus will be on investing in digital banking, improving operational efficiency and scaling up subsidiaries, according to the bank’s chief financial officer Jairam Sridharan.

However, Chaudhry’s first priority will be to put in place a new team. Axis Bank’s executive director in charge of retail banking Rajiv Anand has replaced Srinivasan Varadarajan, the outgoing deputy managing director in charge of corporate banking. Anand has been appointed the executive director of its wholesale banking arm. Chaudhry’s entry into the Axis Bank corner room is likely to be accompanied by the induction of some close associates from the insurance industry.

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Axis Bank’s financial performance has been improving and it is set to enter the last leg of its balance sheet clean-up. The bank reported an 83% jump in net profit in Q2 FY19 and saw its gross NPAs fall for the third straight quarter to 5.96% of its loan book.

“We see a lot of opportunity in growing the housing loan business in the wake of the NBFC crisis. Lower-end small and medium enterprises (SMEs), which are typically underserved, are another area of opportunity," said Sridharan, reiterating that the bank’s confidence in corporate lending is still intact. “However, we will make sure not to concentrate on specific clients or industries," he said. Axis Bank, like ICICI Bank, has been reducing its exposure to companies and concentrating on the retail franchise.

Among the three banks, Yes Bank’s new CEO, who is yet to be chosen, is likely to face the toughest challenge. The new executive will replace promoter and CEO Rana Kapoor, who was forced to step down after the Reserve Bank of India (RBI) raised concerns about the lender’s poor corporate governance and accounting practices, and under-reporting of bad loans.

Besides restoring the bank’s credibility, the new leader will have to clean up its balance sheet. The bank has seen a flurry of exits from the board in recent months.

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Yes Bank said its search and selection committee as well as the board discussed names of candidates shortlisted by Korn Ferry, a global executive search firm, and would present its final recommendation to RBI, after its next board meeting scheduled for 9 January.

As the three new leaders settle into their assignments, the domestic private banking sector is likely to see some churn in strategies and market shares.

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