ING to resume branch expansion, aims to grow 4-5% faster than the market2 min read . Updated: 10 Feb 2014, 02:00 PM IST
The bank is in search of faster growth and a higher return on assets
Mumbai: ING Vysya Bank Ltd will end its self-imposed moratorium on opening branches, and expand its network over the next year, in search of faster growth and a higher return on assets.
Managing director and chief executive officer (CEO) Shailendra Bhandari said the bank aims to add 40-50 branches each year from April, after having decided “to go slow on branch openings" in April 2012.
“We have 550 branches while larger banks like Axis Bank Ltd have three times as many and six times our balance sheet. Over the last few years we increased our ability to push business through existing branches. Now we feel there is a need to invest in branches for current and savings accounts (Casa) and priority sector lending. We believe that we can bring cost to income down and at the same time increase assets because revenues will increase," Bhandari said at the Edelweiss India Conference 2014 on Monday.
The bank aims to grow 4-5% faster than the market over the next year.
Thirty-two per cent of ING Vysya’s deposits are in Casa. Though the bank has decided not to pay higher interest on savings accounts unlike some of its competitors, the decision is not “cast in stone", Bhandari said.
“We are in an elevated interest rate scenario since the deregulation in savings account rates. Our average cost of Casa is 2% and we may do something on a tactical basis," Bhandari said.
The bank’s retail loan book has grown by 20% so far this fiscal year led by mortgages and loans against property. Bhandari said the bank’s retail and SME (small and medium enterprises) portfolio remains “solid" despite the economic downturn.
But Bhandari cautioned banks against targeting the retail segment aggressively to fuel growth. As corporate lending has slowed, a number of banks have shifted focus on lending to the retail segment to drive growth.
“The mid-corporate segment is the one which is dangerous because this segment has continued to show stress since the Lehman crisis," Bhandari said.
ING Vysya defines mid corporates as companies with annual turnover of ₹ 1,500 crore.
Bhandari also said he expects asset quality pressures to ease after the next couple of quarters. “When the economy turns, the credit cycle lags it by two quarters. My sense is that there are two or three more quarters of pain, after which it would have flowed through the system," he said.
At 12.58pm, shares of ING Vysya Bank were trading at ₹ 540 on BSE, up 0.09%, while the exchange’s benchmark Sensex fell 0.05% to 20,366.99 points.