Private sector banks are gradually gaining market share at the expense of public sector banks, according to Bengaluru-based credit rating agency Brickwork Ratings.
The agency, in its first Bank Book, estimated that public sector banks (PSBs) have lost market share by about two per cent and the same has been gained by private sector banks in FY15.
If the current growth trends continue for another three years, by FY18, Brickwork Ratings’ estimate is that PSBs share would have come down to about 71 per cent, and the entire gain will be of the private banks.
Pointing out that PSBs particularly have been showing all the negative signs — low credit growth, poor asset quality, high restructured assets, high provisions, and low profitability, Vivek Kulkarni, MD, said this has resulted in a clear situation where the PSBs not only lose market share, but also potentially lose good and profitable business.
Almost all the standard ratios by which the performance of banks are measured have declined for the PSBs.
In contrast, the private banks have accredited themselves quite well by avoiding lending to problem sectors such as infrastructure and steel, lending short-term rather than long term, focus on retail loans and wealth management products, and better risk management practices.
“The familiar story of discerning and desirable clients leaving public sector entities (as they have done in respect of schools, hospitals, airline, telecom or broadcast services) and moving to services provided by savvy private players is likely to be repeated,” the Bank Book said.
The agency observed that when the economy itself slows down, what is available for incremental growth also comes down and banks with adequate capital and risk management capability will encash the same.
This was clearly visible in the growth of private banks, with the better-known names registering 18-28 per cent growth.
HDFC Bank, with a decent base, still grew by 21.77 per cent, while Kotak Mahindra and YES Bank, with relatively smaller base, grew by over 25 per cent, the agency said.