INDIA
S MOST RESPECTED COMPANIES 6 ICICI BANK
Bank With A Big Bang
How
ICICI Bank went through strategy change, HR issues and global crisis -- all at
the same time
ICICI
Bank is in a majority of one. It is perhaps the only one to have transitioned
from being a socialist-era term-lending relic to a successful 21st century
bank. Under K.V. Kamath, it set itself new terms of reference — covering
everything from retail to corporate banking, the use of technology and,
extolled the virtue of going about business with unabashed pride.
But when Chanda Kochhar took over from Kamath in December 2009, a new reality confronted her and the bank’s brass. The world had just come down with a giant financial flu; unbridled growth funded largely by costly wholesale deposits had led to an uptick in dud loans and flaky returns. ICICI Bank had to change with the topography. And change it has, over the past four years. In this second coming under Kochhar, the bank has earned itself new stripes, a feat that seen it topping the BFSI space in BW’s Most Respected Companies survey for 2012-13.
“We realised the financial markets had changed. We had to recalibrate the model,” says Kochhar. In essence, ICICI Bank had decided to go back to basics — it bid adieu to its credit binge, focused on the quality of its loan book, slashed costs and concentrated on cheap deposits — current and savings accounts (Casa). In PowerPoint parlance, it read as the four Cs: credit growth, credit quality, costs and Casa.
It helped that the bank had a capital adequacy ratio of 15.5 per cent. But despite that, Kochhar decided to slam the brakes — the bank cut its loan book by 3.2 per cent by end-March 2009. And, at the same time, leveraged its expanded branch network as an integrated channel for deposit mobilisation (in 2009, it got the nod to open 580 new branches by end-March 2010). The early signs of an improvement in ICICI Bank’s Casa had started to trickle in — it had moved up to 28.7 per cent in end-March 2009 from 27.4 per cent in end-December 2008 and 26.1 per cent in end-March 2008.
Then there was a perception battle to be waged and won. “There was a gap between how others saw us and how we saw ourselves,” says Kochhar. It is not unusual; it happens to the best in a class. A key challenge was to convey the bank’s strategic shift to its immediate family of stakeholders — employees. This, given that it’s not easy to change the game plan midway and come up with fresh field settings.
Says Kochhar: “I sat down not only with my senior colleagues but also those down the line to get them to buy into the vision.” She goes on to elaborate. When ICICI Bank trimmed its personal loan portfolio, it did not cut the headcount; rather, it retrained its staff. “It would have been easier to let them go, but we did not do that.” For all its aggressiveness, it did not go down the road that some of its more voluble peers took — issue pink slips.
The transformation of ICICI Bank is all the more remarkable as the change at the helm came amidst an exodus of three senior executives — Shikha Sharma moved to Axis Bank; Renuka Ramnath to Multiples Alternate Asset Management, a private equity firm; and V. Vaidyanathan to the Fortune Group. And, the media portrayal of the bank that was once admired in the financial sector as an upstart.
“When I look at what ICICI Bank went through — a global crisis, a change in strategy and the attendant HR issues — I doubt if another organisation of its scale and reach has gone through anything like it. I think the bank had a core group of long co-travellers which helped it pull through because of the confidence they inspired,” says Priya Chetty-Rajagopal, partner at Stanton Chase.
Along with the four Cs, the bank added a fifth C: customer centricity, with the slogan Khayaal Aapka (roughly translated, it means ‘we care for you’). Kochhar says while she may not personally respond to all the mails she receives from customers on their grievances, what the bank does is get all departments to sit together and sort out issues. It taps the social media too. The bank’s Facebook initiative continues to be appreciated by customers, with the fan base touching more than 2 million.
It has also been about strong fundamentals — bread and butter working capital loans and transaction banking. The point is, even after the reverse merger with its parent, ICICI Limited, in 2001, the bank had not made a complete transition to a commercial set-up; the focus continued to be on project finance, which was a ‘lumpy’ income stream.
“The residual momentum from the term-lending days continued to power us,” says Kochhar. And with retail banking providing a good alternative (albeit for a short period prior to the global crisis), a full-fledged transition to a commercial bank had got lost along the way.
It has been hard and bumpy ride for ICICI Bank, but it has accomplished what it set out to do. “I only hope we don’t become complacent now,” says Kochhar. Though she will not stake claim, to her goes a large measure of the credit for ICICI Bank’s turnaround.
Time for Kochhar to take a bow.
Raghu MohanBW130909
But when Chanda Kochhar took over from Kamath in December 2009, a new reality confronted her and the bank’s brass. The world had just come down with a giant financial flu; unbridled growth funded largely by costly wholesale deposits had led to an uptick in dud loans and flaky returns. ICICI Bank had to change with the topography. And change it has, over the past four years. In this second coming under Kochhar, the bank has earned itself new stripes, a feat that seen it topping the BFSI space in BW’s Most Respected Companies survey for 2012-13.
“We realised the financial markets had changed. We had to recalibrate the model,” says Kochhar. In essence, ICICI Bank had decided to go back to basics — it bid adieu to its credit binge, focused on the quality of its loan book, slashed costs and concentrated on cheap deposits — current and savings accounts (Casa). In PowerPoint parlance, it read as the four Cs: credit growth, credit quality, costs and Casa.
It helped that the bank had a capital adequacy ratio of 15.5 per cent. But despite that, Kochhar decided to slam the brakes — the bank cut its loan book by 3.2 per cent by end-March 2009. And, at the same time, leveraged its expanded branch network as an integrated channel for deposit mobilisation (in 2009, it got the nod to open 580 new branches by end-March 2010). The early signs of an improvement in ICICI Bank’s Casa had started to trickle in — it had moved up to 28.7 per cent in end-March 2009 from 27.4 per cent in end-December 2008 and 26.1 per cent in end-March 2008.
Then there was a perception battle to be waged and won. “There was a gap between how others saw us and how we saw ourselves,” says Kochhar. It is not unusual; it happens to the best in a class. A key challenge was to convey the bank’s strategic shift to its immediate family of stakeholders — employees. This, given that it’s not easy to change the game plan midway and come up with fresh field settings.
Says Kochhar: “I sat down not only with my senior colleagues but also those down the line to get them to buy into the vision.” She goes on to elaborate. When ICICI Bank trimmed its personal loan portfolio, it did not cut the headcount; rather, it retrained its staff. “It would have been easier to let them go, but we did not do that.” For all its aggressiveness, it did not go down the road that some of its more voluble peers took — issue pink slips.
The transformation of ICICI Bank is all the more remarkable as the change at the helm came amidst an exodus of three senior executives — Shikha Sharma moved to Axis Bank; Renuka Ramnath to Multiples Alternate Asset Management, a private equity firm; and V. Vaidyanathan to the Fortune Group. And, the media portrayal of the bank that was once admired in the financial sector as an upstart.
“When I look at what ICICI Bank went through — a global crisis, a change in strategy and the attendant HR issues — I doubt if another organisation of its scale and reach has gone through anything like it. I think the bank had a core group of long co-travellers which helped it pull through because of the confidence they inspired,” says Priya Chetty-Rajagopal, partner at Stanton Chase.
Along with the four Cs, the bank added a fifth C: customer centricity, with the slogan Khayaal Aapka (roughly translated, it means ‘we care for you’). Kochhar says while she may not personally respond to all the mails she receives from customers on their grievances, what the bank does is get all departments to sit together and sort out issues. It taps the social media too. The bank’s Facebook initiative continues to be appreciated by customers, with the fan base touching more than 2 million.
It has also been about strong fundamentals — bread and butter working capital loans and transaction banking. The point is, even after the reverse merger with its parent, ICICI Limited, in 2001, the bank had not made a complete transition to a commercial set-up; the focus continued to be on project finance, which was a ‘lumpy’ income stream.
“The residual momentum from the term-lending days continued to power us,” says Kochhar. And with retail banking providing a good alternative (albeit for a short period prior to the global crisis), a full-fledged transition to a commercial bank had got lost along the way.
It has been hard and bumpy ride for ICICI Bank, but it has accomplished what it set out to do. “I only hope we don’t become complacent now,” says Kochhar. Though she will not stake claim, to her goes a large measure of the credit for ICICI Bank’s turnaround.
Time for Kochhar to take a bow.
Raghu MohanBW130909
See more at:
http://www.businessworld.in/news/finance/banking/bank-with-a-big-bang/1042363/page-1.html#sthash.lIzspVEj.dpuf
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