Sector Update | 14
Sector Update Financials
The rising significance of liability franchise: Version 2.0
Private banks strategically expanding presence in SA rich states
North has highest SA balance
SA per capita (INR)
All India (INR)
In our earlier report on liability franchise published in Mar’19 —
significance of liability franchise’,
we highlighted how the importance of a strong
liability franchise will increase as new universal banks and SFBs aggressively chase
deposits to drive business growth. We had also argued that unlike the historical trend,
M&A activities in the BFSI space will be incrementally driven by the importance of
In this note, we dig deeper to understand the trend in deposits build-up across
geographical regions, population types and the branch expansion strategy being
followed by different lenders. The key takeaways are: (a) Over the past decade, the
Western region’s market share in total deposits has declined 532bp to 25.6%, but
gains were witnessed in the South (200bp), Central (210bp) and the East (200bp). (b)
In SA deposits, the South and Central regions have been witnessing strong traction
(~43% of incremental SA over the last decade). (c) Among states, Tamil Nadu, Haryana
and Rajasthan are gaining SA market share, growing at 18% CAGR (over the past five
years) and emerging as the new bastions of incremental SA growth. (d) Private Banks
aggressively expanded their branch presence in SA rich states; since FY15, almost 58-
75% incremental branch expansion of the top-6, large private banks were in the top-10
SA states. Consequently, about 63-73% of their branch network is present in the top-
10 SA states.
Top SA rich states – SA per capita
SA per Capita (INRk)
Deposits: Share gains in South, Central and the East; the West continues to lose
Over the past decade, share of the Western region in the total systemic deposits
has declined 532bp to 25.6% in 1HFY19. Its share in the CASA mix also declined
~300bp to 21.8% over the same period. The South/Central/East reported an
increase of 200bp/210bp/198bp in deposits market share over the same period.
The share of
in total deposits has declined 600bp over the past
decade to 19.5%, followed by 300bp decline in
share to ~10%, while UP
gained the maximum share by ~150bp.
South and Central regions gaining size – account for 43% of total SA mobilization
Over the past two decades, share of SA deposits has increased ~840bp to the
current ~33%. This has aided a steady increase in CASA mix, which improved by
~460bp to ~41% over the same period.
The momentum in SA growth remains strong with the system witnessing a 13%
CAGR over the last five years, led by robust 19% CAGR for private banks.
The South and the Central regions continue witnessing strong traction in SA
deposits and together account for ~43% of the total SA mobilization. Among
states, Tamil Nadu, Haryana and Rajasthan are gaining SA market share, growing
at 18% CAGR (over the past five years) and emerging as the new bastions of
incremental SA growth.
Research Analyst: Nitin Aggarwal
(Nitin.Aggarwal@MotilalOswal.com); +91 22 6129 1542 |
(Parth.Gutka@motilaloswal.com); +91 22 6129 1567
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.