The banking sector was in the news in 2018 for all the wrong reasons. While the challenges from digitisation and fintech players remained, what created more trouble was the deteriorating asset quality. The performance also took a beating because of stricter provisions. The governance issues in some of the private banks also created a flutter in the market, leading to exits of star CEOs. So, what is in store for the banking sector in 2019?
After the merger of State Bank of India (SBI) with its five associates, all eyes are now on the merger of three PSBs -- Bank of Baroda, Dena Bank and Vijaya Bank. Unlike SBI, this merger is going to be challenging because there is no associate-parent relationship. All the three banks have different geographic presence, wok culture, IT platforms etc. The BoB, where the government had earlier experimented with outside professional, has taken a leap in many of the ways its business was conducted earlier. The best possible route for this merger would be to adopt the business practices of BoB and integrate others.
New private bank CEOs
There are new CEOs in some of the large private banks. Sandeep Bakhshi is now leading the ICICI Bank after ex-CEO Chanda Kochhar left due to governance issues. Amitabh Chaudhry is leading the Axis Bank after ex-CEO Shikha Sharma left because of poor performance of Axis Bank. YES Bank will also see a change from founder professional Rana Kapoor to a professional. HDFC Bank also has to speed up its succession process as Aditya Puri would be retiring soon. The successor in the private banks will be in the news and also the succession planning in some of the banks.
Corporate banking to make a comeback
In the last few years, the retail engine was growing robustly. There are now expectations of corporate lending to make a comeback. Infrastructure (especially roads, metro etc), commodities (steel, cement etc) and consumption companies are set to see action.
Peaking of NPAs
The NPAs are almost peaking. As the banks have made huge provisions for stressed assets, year 2019 may see writing back of some profits as resolution of assets will also gather steam.
More realisation through IBC
In the last two years, the Insolvency and Bankruptcy Code (IBC) saw a lot of action in terms of amendments, challenges and counter claims. The law is now stabilising and could see more cases coming out of it. This will help the banks recover good value.