Fox-Pitt, Kelton's latest survey of Asia's Best Managed Banks has identified Housing Development Finance Corporation as the best managed financial institution in India and among best in the region.
This is by virtue of its superior cost management, strong mergers and acquisitions track record and good corporate governance.
FPK is a leading investment bank specialising in the financial services industry and focusing on the insurance, banking and related sectors on a global scale. A wholly owned subsidiary of Swiss Re, FPK was founded in 1971. HDFC Bank stood second and the bank's lower rating, as compared to its parent, reflects higher costs.
ICICI Bank found itself in third position. Its low score is on account of poor financial performance, judged on an ability to deliver risk-adjusted revenues.
Among the public sector banks, State Bank of India management is rated better than Bank of Baroda, reflecting a management that is able to deliver better financial performance. It has demonstrated the ability to manage in a changing environment by controlling cost and changing its loan mix.
Across Asia, ANZ grabbed the top slot as the best managed bank in the region due to strong financial performance driven by excellent cost and capital management. Westpac and Kookmin were in second and third positions. Among the top 44 banks, five Indian banks featured. HDFC occupied no 6 slot, HDFC Bank 9, ICICI Bank 21, SBI 31 and BoB 38.
In assessing the quality of management, FPK has given 50 per cent weightage to financials as its sees historical return on assets as a power tool to measure management effectiveness in banking.
Within this parameters, there are three sub-parameters: risk and capital adjusted revenues, cost management and capital management. Among the non-financial parameters, M&A track records accounts for 25 per cent weightage, corporate governance 10 per cent, management continuity 10 per cent and change management/vision 5 per cent.
"Management performance, based on financials, does not throw up any major surprises for Indian banks. HDFC stands out as the best performer, mainly due to its excellent cost control and recent performance in managing its capital base. HDFC Bank too does well overall, with BoB and ICICI Bank being the laggards," the report said.
SBI, according to FPK, has the best risk adjusted revenues in the sector reflecting a very low risk capital utilisation. Risk weighted assets for SBI are 47 per cent of total balance sheet against an average of 69 per cent by other four Indian financial intermediaries that found place in the survey.
The report, however, did not give SBI management a very high rating on this count as its superior returns reflect a solid liabilities franchise, which is a function of its legacy and not a management driven achievement. In fact, SBI's liabilities franchise is as solid as that of Hang Seng in Hong Kong.
"ICICI Bank is a laggard as far as revenue generation goes -- the past being dominated by the wholesale business model and poor asset quality and the current situation being impacted by the merger of ICICI and ICICI Bank," it said.
HDFC scored the highest on corporate governance with transparent disclosures and a focus on shareholders' interests. The PSU banks figured at the other end of the spectrum with poor disclosure, a lack of care for minority shareholders and less than reliable accounting (understated NPAs and overstated capitalisation).
