01 July 2019 India | Indian Banking Sector | Sector Report

Indian Banking Sector

Mapping India’s deposits
We conduct a detailed analysis on the deposit landscape in India at a time when the system Sameer Bhise
deposit growth (8% CAGR for last 2 years) continues to lag credit growth (11% CAGR) and sameer.bhise@jmfl.com | Tel: (91 22) 66303489
system CD ratio is near historical peak levels at 77%. We have tried to identify ‘pockets of S Parameswaran
s.parameswaran@jmfl.com | Tel: (91 22) 66303075
sticky liquidity’ which throw up opportunities for banks to tap incremental deposit growth,
and analyse the deposit strongholds for banks across Indian states. Our analysis suggests that Akshay Jain
akshay.jain@jmfl.com | Tel: (91 22) 66303099
while PSU banks continue to lose market share in deposits, their market share losses in
Karan Singh
stickier SA has largely been in line with the decline in their branch market share. This seems karan.uberoi@jmfl.com | Tel: (91 22) 66303082
to indicate that private banks have largely grown by growing the market pie (and not balance Bunny Babjee
transfers) to obtain retail SA – while there is evidence for balance migration in CA and TD. bunny.babjee@jmfl.com | Tel: (91 22) 66303263
We also do a deep dive into the 2 biggest deposit pools in India, the MMR and Delhi regions
(which account for 24% of overall deposits), to look at how banks have fared there.
 Where does the opportunity lie? While system deposit growth CAGR was at 10% over Private Banks Reco. TP
FY14-19, the biggest drag has been due to the Western region (contributes 26% to overall Axis Bank BUY 865
pie), which has grown at 6% CAGR over same period. Specifically the TD growth CAGR in HDFC Bank BUY 2,600
the region has been weak at 3%. We believe incremental deposit growth for private banks ICICI Bank BUY 460
in western and northern regions will be driven by market share shifts. We expect eastern Kotak Bank BUY 1,435
and central regions to be the major drivers for incremental deposit growth for private Yes Bank BUY 265
banks, where branch penetration and per capita deposits are lower (Exhibit 7,10), PSU Indusind Bank BUY 1,860
Federal Bank BUY 120
market share is disproportionately higher (Exhibit 1) and utilisation levels for private banks is
DCB Bank BUY 250
still low (Exhibit 11). In spite of this, deposit growth in these 2 regions which account for
City Union Bank BUY 220
26% of the system deposits has outpaced the system deposit growth (11-12% CAGR over
Bandhan Bank BUY 710
FY14 -19 vs 10% for system). We believe that they will continue to be pockets of deposit
PSU Banks Reco. TP
growth, especially for private banks. SBI BUY 385
 Winning back deposit market shares from PSUs – is it really all that easy? Our analysis PNB HOLD 95
suggests that while PSUs continue to lose market share in deposits (7 ppts in FY14-18), Canara Bank HOLD 300
their market share losses in stickier SA has largely been in line with the decline in their Bank of Baroda BUY 135
branch market share. This seems to indicate that privates have largely grown by growing
the market pie (and not balance transfers) to obtain retail SA. This can be attributed to the
stickier nature of SA deposits – the household sector contributed c.82% of total SA pie
(Mar-18) while private corporates contributed c.44% of the CA pie. Private banks have
been much more successful in terms of market share gains on the CA and TD fronts.
Market share gains in CA and TD were 10 ppts and 7 ppts over FY14-18, compared to the
5 ppts gain in overall branch market share.
 Where do banks get their deposits from? Private banks have been largely successful in
garnering deposits from the deposit-rich hubs of Maharashtra and NCR – with these 2
regions alone contributing 37-56% of respective overall deposits for large private banks in
our coverage. A deep dive into the 2 biggest deposit pools of MMR and Delhi regions (24%
of system deposits), suggests that large private banks hold the edge over PSUs in these
regions – with disproportionately higher market shares compared to their overall system
market shares.

States with high deposit penetration

% of total Deposit market share Branch market share Branches per 1
Deposit/GDP
State deposits (Mar-18) (Dec-18) lakh people
(Mar-19)
(Mar-19) PSU Bank Pvt. Bank PSU Bank Pvt. Bank (Dec-18)
Maharashtra 20% 91% 53% 37% 63% 28% 1,187
NCT Of Delhi 9% 155% 63% 27% 67% 31% 2,299
JM Financial Research is also available on:
Bloomberg - JMFR <GO>,
West Bengal 6% 68% 77% 19% 62% 26% 1,007
Thomson Publisher & Reuters,
Punjab 3% 73% 80% 17% 68% 24% 2,418
S&P Capital IQ, FactSet and Visible Alpha
Jharkhand 2% 76% 89% 7% 71% 13% 965
Chandigarh 1% 174% 70% 27% 70% 27% 4,482 Please see Appendix I at the end of this
Goa 1% 97% 80% 20% 72% 28% 4,827 report for Important Disclosures and
Jammu & Kashmir 1% 77% 27% 69% 27% 54% 1,475 Disclaimers and Research Analyst
All India 66% 67% 25% 62% 22% 1,245 Certification.
Source: RBI, JM Financial, Population as per 2011 census

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Indian Banking Sector 01 July 2019

Key Charts
Exhibit 1. Deposit growth across regions Exhibit 2. Distribution of deposits by ownership (Mar-18)
CAGR (FY14-19) (%)
Region Government Sector Private Corporates (incl Fin) Households - Individuals
CA SA TD Total Deposits
Households - Others Foreign Sector
WESTERN REGION 11% 14% 3% 6% 100% 1% 5% 7%
SOUTHERN REGION 12% 15% 9% 11% 9%
90% 5%
24% 8% 9%
NORTHERN REGION 10% 14% 9% 10%
80%
CENTRAL REGION 9% 14% 9% 11%
EASTERN REGION 9% 14% 10% 12% 70% 14%
NORTH-EASTERN REGION 10% 14% 11% 12% 60% 49% 55%
All India 11% 14% 7% 10% 50% 77%
Source: RBI, JM Financial
40% 44%
30%
20% 16%
20%
1%
10% 17%
11% 14% 14%
0%
CA (%) SA (%) TD (%) Total Deposits (%)

Source: RBI, JM Financial # ’Household others’ is largely sole proprietors/ partnership firms

Exhibit 3. Market share lost by PSU banks (FY14-18) Exhibit 4. Market share gains by private banks (FY14-18)
Western Northern North - Eastern Southern Eastern Central All India Western Northern North - Eastern Southern Eastern Central All India

CA SA TD Total Deposits Branch 16%

0%
14%
-2%
12%
-4%

-6% 10%

-8% 8%

-10% 6%
-12% 4%
-14%
2%
-16%
0%
-18% CA SA TD Total Deposits Branch

Source: RBI, JM Financial Source: RBI, JM Financial

Exhibit 5. CASA + Retail TD market share (Mar-18) Exhibit 6. HDFC Bank: State-wise deposit break-up*

AXSB HDFCB YES

5% 7% 1% Maharashtra
ICICIBC KMB
2%
18%
Others 5% IIB Gujarat
33% 1%
FB 31% UP
1% 4% WB
BOB DCBB TN
0%
4%
5% Karnataka
2%
PNB CUBK Delhi
6% 1% 11% Kerala
CNBK 6%
5% Haryana
BANDHAN 5% Telangana
SBIN 8%
28%
0% 6% 4% Others

Source: RBI, JM Financial; System CASA and Retail TD is taken as sum of system CASA + ‘Household – Source: Company, RBI, respective SLBC, JM Financial *For other banks please refer Exhibits 32-39
Individuals TDs’

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Indian Banking Sector 01 July 2019

Indian households have increasingly been inclined towards financial savings in the recent
past. Net financial savings as a % of net household savings increased to 38% as of FY18, up
from 31% in FY12. This has helped sustain flows into financial assets, despite a general
decrease in the savings rate in the economy. Gross savings to GDP ratio has declined to
30.5% as of FY18, from 34.6% as of FY12. Additionally, with increasing financial literacy in
the country, proportion of gross savings being invested in non-bank deposit financial
channels (like mutual funds and life insurance) has seen an increase (MF AUM has grown at a
CAGR of 15% over FY14-19). This is one of the reasons for slower bank deposit accretion
(c.9.6% CAGR over FY14-19). Accordingly, bank deposits to GDP ratio has witnessed a
decline to 66% as of FY19, from 71% as of FY14, indicating that deposit growth has been
slower than GDP growth over FY14-19 (9.6% vs. 11.2%).

How is the deposit pie split across India?

Exhibit 7. Key Deposit Indicators

Source: RBI, JM Financial, Population as per 2011 census

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Indian Banking Sector 01 July 2019

Exhibit 8. Distribution of deposits across regions (Mar-19) Exhibit 9. Type of deposits across regions (Mar-19)
CA (%) SA (%) TD (%)
CA SA TD 100%
35 33.0 90%
30.1
30 80% 42%
26.4 47%
59% 52% 58%
70% 61% 64%
25
21.2 60%
20 17.7
INR trn

16.7 16.9 50%

16.0
15 40%
8.8 7.9 47%
30% 41% 46%
10 31% 23% 32% 33%
7.5 9.8 20%
8.1
5 2.4 6.8 7.8 10%
4.4 9% 13% 9% 12% 7% 9%
2.3 2.7 1.2 1.1 0% 7%
0
Northern Western Southern North - Eastern Central Northern Western Southern North - Eastern Central All India
Eastern Eastern
Source: RBI, JM Financial Source: RBI, JM Financial

For CA and SA deposits, we see that the CAGR (FY14-19) was largely similar across regions.
For Term Deposits, while we see a low CAGR of 3% in Western region (already at a high
penetration), other regions witnessed a more comparable CAGR ranging from 9-11%.

Exhibit 10. Deposit growth across regions – TD growth in the Western region has been the
major drag
CAGR (FY14-19) (%)
Region
CA SA TD Total Deposits
WESTERN REGION 11% 14% 3% 6%
SOUTHERN REGION 12% 15% 9% 11%
NORTHERN REGION 10% 14% 9% 10%
CENTRAL REGION 9% 14% 9% 11%
EASTERN REGION 9% 14% 10% 12%
NORTH-EASTERN REGION 10% 14% 11% 12%
All India 11% 14% 7% 10%
Source: RBI, JM Financial

We have calculated region-wise bank deposits to GDP ratio as below and identified the
potential growth regions for deposits:

Exhibit 11. Bank deposits to GDP ratio (Mar-19)

90%
81%
80% 76%

70% 67% 66%

59%
60% 54%
48%
50%

40%

30%

20%

10%

0%
Northern Western Southern North - Eastern Central All India
Eastern

Source: RBI, JM Financial

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Indian Banking Sector 01 July 2019

A. Competition to remain high in northern and western regions

As on Mar-19, the bank deposits to GDP ratio for the northern and western regions
(representing 47% of the banking system deposits as on Mar-19), is higher than the national
average, at 81% and 76% respectively. The higher ratio is a result of:

a) Well-established branch network in the regions

Exhibit 12. Northern and Western regions have higher branch penetration
Branches per 1 lakh people Deposits per branch (INR mn) (RHS)
1,800 1,600

1,600 1,400
1,400
1,200
1,200
1,000
1,000
800
800
600
600
400
400

200 200

0 0
Northern Western Southern North-Eastern Eastern Central All India

Source: RBI, JM Financial, Population as per 2011 census

b) Higher deposits per capita

Exhibit 13. North and west have disproportionately higher deposits per capita (INR) (Mar-19)

Source: RBI, JM Financial, Population as per 2011 census

Given the high level of deposit penetration, the incremental deposit CAGR (FY14-19) has
been lowest for western region at 6%. In the northern region while the deposit CAGR (FY14-
19) has been higher, the growth has slowed down over last 2 years as penetration levels have
increased.

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Indian Banking Sector 01 July 2019

Exhibit 14. Deposit CAGR (FY14-19) has been lowest for west and north

Deposit CAGR (FY14-19) Deposit CAGR (FY17-19)

14%

12%

10%

8%

6%

4%

2%
10% 5% 6% 5% 11% 6% 12% 7% 12% 6% 11% 6%
0%
Northern Western Southern North-Eastern Eastern Central
Source: RBI, JM Financial

Given the high level of deposit penetration, incremental deposit growth from these regions
will largely be a factor of increase in GDP per capita (and in turn increased savings). Hence,
competition among banks is expected to remain high with focus on getting a higher share of
the existing as well as incremental deposits. Accordingly, western and northern regions have
seen higher market share gains by private banks at 12% and 7% respectively during FY14-
18.

Exhibit 15. Private banks have higher market share gains in Northern and Western regions
(FY14-18)

Source: RBI, JM Financial

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Indian Banking Sector 01 July 2019

B. Eastern and central regions – New frontiers for growth?

While the bank deposits to GDP ratio for eastern and central regions (representing 26% of
total banking system deposits as on Mar-19) is fairly close to national average at 67% and
59% respectively, high growth opportunity exists in these regions due to lower branch
penetration.

Exhibit 16. Eastern and central regions have lower branch penetration
Branches per 1 lakh people Deposits per branch (INR mn) (RHS)
1,800 1,600

1,600 1,400
1,400
1,200
1,200
1,000
1,000
800
800
600
600
400
400

200 200

0 0
Northern Western Southern North-Eastern Eastern Central All India

Source: RBI, JM Financial, Population as per 2011 census

While there are ample growth opportunities for deposit growth in eastern and central regions
given the low levels of penetration, private banks are expected to benefit more given their
disproportionately lower levels of branch utilisation as compared to PSU banks. Deposits per
branch for private banks in east and central regions stood at 0.6x and 0.8x of their PSU
counterparts respectively. This is as compared to a national average of 1.1x, which indicates
that private banks are relatively under-utilised in the eastern and central regions.

Exhibit 17. Private banks in eastern and central regions have lower deposits per branch
PSU Bank Pvt. Bank Pvt banks to PSU banks deposit per branch ratio
2,000 1.6
1,800 1.4
1,600
1.2
1,400
1,200 1.0

1,000 0.8
INR

800 0.6
600
0.4
400
200 0.2

0 0.0
Northern Western Southern North - Eastern Central All India
Eastern
Source: RBI, JM Financial

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Indian Banking Sector 01 July 2019

C. Deposit penetration continues to be low in South

Bank deposits to GDP ratio for Southern region (representing 24% of total banking system
deposits as on Mar-19) at 54% is lower than national average of 66%. While Southern states
have a well-established branch network, the deposit per branch is lower (c.INR 724mn
against national average of c.INR 833mn) , which indicates that there is room for
improvement in utilisation of branches.

Exhibit 18. South still lags behind on deposit per branch

Branches per 1 lakh people Deposits per branch (INR mn) (RHS)
1,800 1,600

1,600 1,400
1,400
1,200
1,200
1,000
1,000
800
800
600
600
400
400

200 200

0 0
Northern Western Southern North-Eastern Eastern Central All India

Source: RBI, JM Financial, Population as per 2011 census

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Indian Banking Sector 01 July 2019

Where do we think the opportunity lies?

The following table denotes the top states which can be the key candidates for banks to drive
their incremental deposit growth:

Exhibit 19. Top states with strong deposit growth potential

% of total Per Capita Indicators (INR) Branches per 1
Deposit/GDP Deposit market share (Mar-18) Branch market share (Dec-18)
States deposits (Mar-19) lakh people
(Mar-19)
(Mar-19) Deposits GDP PSU Bank Pvt. Bank Others PSU Bank Pvt. Bank Others (Dec-18)
Tamil Nadu 6% 110,713 221,370 50% 60% 34% 7% 59% 31% 9% 1,577
Gujarat 5% 111,632 241,619 46% 74% 23% 3% 65% 23% 12% 1,390
Telangana* 4% 131,080 240,726 54% 66% 26% 8% 62% 20% 18% 1,524
Rajasthan 3% 55,236 134,832 41% 74% 18% 8% 58% 17% 24% 1,107
Madhya Pradesh 3% 50,742 113,747 45% 84% 10% 6% 62% 17% 22% 972
Andhra Pradesh* 2% 60,686 174,351 35% 77% 14% 10% 67% 15% 18% 1,444
Chhattisgarh 1% 55,803 122,003 46% 79% 14% 7% 57% 18% 25% 1,056
Assam 1% 47,172 102,566 46% 81% 12% 7% 53% 25% 22% 931
All India 103,742 156,820 66% 67% 25% 8% 62% 22% 17% 1,245
Source: RBI, JM Financial, Population as per 2011 census *Deposit / GDP for Andhra Pradesh and Telangana is as on Mar-15 and Mar-19

We believe the states of Tamil Nadu, Gujarat, Telangana, Rajasthan, Madhya Pradesh,
Andhra Pradesh, Chhattisgarh and Assam are the top contenders for the incremental deposit
growth in the banking system.

Exhibit 20. Top Banks (by branch market share) which can tap incremental deposits
State PSU Banks Private Banks
Tamil Nadu SBI, IOB, Indian Bank, Canara Bank ICICI Bank, CUB, KVB
Gujarat BOB (merged), SBI, BOI HDFCB, ICICI Bank, Axis Bank
Telangana SBI, Andhra Bank, BOB (merged), Canara Bank HDFCB, ICICI Bank, Axis Bank, Kotak Bank
Madhya Pradesh SBI, BOI, CBI, BOB (merged), PNB HDFCB, ICICI Bank, Axis Bank
Andhra Pradesh SBI, Andhra Bank, Canara Bank, BOB (merged) HDFCB, ICICI Bank, Axis Bank, Kotak Bank
Chhattisgarh SBI, BOB (merged), PNB, CBI, Canara Bank HDFCB, ICICI Bank, Axis Bank
Assam SBI, Union Bank, CBI, UCO Bank Bandhan Bank, Axis Bank, HDFCB, ICICI Bank
Source: RBI, respective SLBC, JM Financial

The following table denotes the top states where the deposit penetration is higher compared
to the national average. We expect that there will be intense competition to drive a higher
share of the existing as well as incremental deposits.

Exhibit 21. States with high deposit penetration

% of total Per Capita Indicators (INR) Branches per 1
Deposit/GDP Deposit market share (Mar-18) Branch market share (Dec-18)
State deposits (Mar-19) lakh people
(Mar-19)
(Mar-19) Deposits GDP PSU Bank Pvt. Bank Others PSU Bank Pvt. Bank Others (Dec-18)
Maharashtra 20% 226,915 2,48,819 91% 53% 37% 10% 63% 28% 9% 1,187
NCT Of Delhi 9% 708,883 4,58,504 155% 63% 27% 10% 67% 31% 3% 2,299
West Bengal 6% 85,171 1,25,988 68% 77% 19% 4% 62% 26% 12% 1,007
Punjab 3% 136,791 1,86,816 73% 80% 17% 3% 68% 24% 9% 2,418
Jharkhand 2% 66,238 86,879 76% 89% 7% 4% 71% 13% 16% 965
Chandigarh 1% 649,782 3,72,421 174% 70% 27% 3% 70% 27% 3% 4,482
Goa 1% 487,513 5,02,417 97% 80% 20% 0% 72% 28% 0% 4,827
Jammu & Kashmir 1% 94,189 1,22,699 77% 27% 69% 4% 27% 54% 19% 1,475
All India 103,742 1,56,820 66% 67% 25% 8% 62% 22% 17% 1,245
Source: RBI, JM Financial, Population as per 2011 census

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Indian Banking Sector 01 July 2019

Deposit market share shift from PSU banks to private banks – Is it

really all that easy?

As can be seen from the below exhibit, PSU banks have lost a substantial deposit market
share of c.7ppts to private banks during FY14-18. While private banks have witnessed a
market share gain across all segments – current, savings and term deposits, we see that the
gain in savings account deposit has been disproportionately lower at c. 5ppts when
compared to current account (c.10ppts) and term (7ppts) deposits. We see that change in SA
market share closely tracks the change in branch market share when compared to change in
CA and TD market share.

One of the possible reasons for this trend is the relatively stickier nature of savings account
deposits - household sector (individuals, proprietors, partnerships, trusts, etc.) owned 82.4%
of the total savings deposits as of Mar-18 while private corporates (incl. financial sector
corporates) own a larger proportion of total current account deposits at c.44.2%.

Accordingly, private banks have been able to garner disproportionate market share gains on
the CA and TD front, while the SA market share gains have largely tracked branch market
share changes.

Exhibit 22. Market share lost by PSU banks (FY14-18) Exhibit 23. Market share gains by private banks (FY14-18)
Western Northern North - Eastern Southern Eastern Central All India Western Northern North - Eastern Southern Eastern Central All India

CA SA TD Total Deposits Branch 16%

0%
14%
-2%
12%
-4%

-6% 10%

-8% 8%

-10% 6%
-12% 4%
-14%
2%
-16%
0%
-18% CA SA TD Total Deposits Branch

Source: RBI, JM Financial Source: RBI, JM Financial

Exhibit 24. Distribution of deposits by ownership (Mar-18)

Government Sector Private Corporates (incl Financials)
Households Foreign Sector
100% 5.4%
1.5% 9.2%

80% 37.8%

60% 57.1%
82.4%

40% 44.2%

19.5%
20%
0.9%
16.6% 11.3% 14.2%
0%
CA (%) SA (%) TD (%)
Source: RBI, JM Financial

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Indian Banking Sector 01 July 2019

Deposit ownership – how does retail and corporate India save?

As on Mar-18, term deposits continue to be the most popular type of deposit across
segments (58% of total deposits) as exhibited in Exhibit 26 below. On the CASA front, while
private corporates tend to have higher investments in form of CA deposits (27% of private
corporate deposits and ‘household-others’), individual households generally have an
inclination towards SA deposits (45% of their total deposits).

Accordingly, as on Mar-18, the overall current account deposits were dominated by private
corporates (incl. financials) and household – others (largely sole proprietors / partnership
firms) accounting for 44% and 24% share of total CA deposits respectively. Individuals
continue to form a significant part of the overall savings account and term deposits (77% of
total SA deposits and 49% of total term deposits).

Exhibit 25. Distribution of deposits by ownership (Mar-18) Exhibit 26. Distribution of deposits by ownership (Mar-18)
Government Sector Private Corporates (incl Fin) Households - Individuals CA (%) SA (%) TD (%)
100%
Households - Others Foreign Sector
100% 1% 90%
5% 9% 7%
90% 5%
24% 8% 9% 80%
80% 52% 54%
70% 61% 58%
70% 71% 74%
14% 60%
60% 49% 55% 50%
50% 77%
40%
40% 19%
44%
30% 2%
30% 27% 45% 32%
20% 16% 20%
20%
1% 27% 27% 24%
10% 10%
17% 14% 14% 12% 2%
11% 2% 10%
0% 0%
CA (%) SA (%) TD (%) Total Deposits (%) Government Private Corp Households - Households - Foreign Total
Sector (incl Fin) Individuals Others Sector
Source: RBI, JM Financial # household others – largely sole proprietors/ partnership firms Source: RBI, JM Financial # household others – largely sole proprietors/ partnership firms

Deposits of household - individuals have seen a robust CAGR of 12% over FY14-18 led by
16% CAGR in savings account deposits and followed by 10% CAGR in term deposits.
However, the CAGR in deposits for private corporates was low at 4% - one possible driver
could be the slower pace of their earnings growth over FY14-18 (NIFTY FY14-18 earnings
CAGR at c.7%). Interestingly, private corporates were able to maintain a strong pace of
growth in the current account deposits (15% CAGR) while the slowdown was witnessed in
term deposits growth (4% CAGR). Similar trend was seen for household – others (largely sole
proprietors / partnership firms) with a 13% and 2% CAGR in current account and term
deposits respectively leading to a moderate overall deposit CAGR of 5% in FY14-18.

Exhibit 27. Deposits growth CAGR (FY14-18) Exhibit 28. Growth CAGR (FY14-18) for private corporates
CA SA TD Total Deposits
20% CAGR FY14-18 Total (INR bn)
18% 18% 20000

15% 16% 15% 16% 15%

14% 15% 15%
15% 13% 14%
12%
15000
12% 12%
10% 10%
10% 8% 10%
Nifty earnings 10000
7% 8% CAGR (FY14-18)
5% 5%
5% 4% 3%
6%
5% 4%
2% 4% 5000
1% 2% 1%
0%
0% 0
Government Private Corp Households - Households - Total
CA SA TD Total Deposits
Sector (incl Fin) Individuals Others
Source: RBI, JM Financial Source: RBI, JM Financial

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Indian Banking Sector 01 July 2019

Retail deposits – How do banks fare?

Retail funding profile (Retail deposits as % of deposits + borrowings) for coverage banks is
given in the below exhibit.

Exhibit 29. Retail funding profile (as % of deposits + borrowings) for coverage banks (Mar-18)
100% 95%
90% 85%

80% 76%
71%
69% 67% 67%
70% 63% 64% 62% 64%
60% 56%
52%
50% 42%
40%
30%
20%
10%
0%
AXSB

FB

DCBB
KMB

YES

CUBK

CNBK
ICICIBC

BANDHAN
IIB

PNB
HDFCB

BOB

SBIN
Source: RBI, JM Financial

The market share of CASA + retail term deposits for our coverage banks is given in the below
exhibit.

As on Mar-18, among large private sector banks, HDFCB is the leader with a market share of
7% followed by AXSB and ICICIBC at 5% each. New-age private sector banks, KMB, Yes and
IIB have lower market share at 2%, 1% and 1% respectively.

Among, PSU banks, SBIN had a dominant market share of 28% (4x the market share of next
bank HDFCB). Other public sector banks, BOB, PNB and CNBK had a market share of 5%
each as on Mar-18.

Exhibit 30. CASA + Retail TD market share for coverage banks (Mar-18)

AXSB HDFCB YES

5% 7% 1%
ICICIBC KMB
Others 5% 2% IIB
33% 1%
FB
1%

BOB DCBB
5% 0%

PNB CUBK
6% 1%
CNBK
5%
BANDHAN
SBIN 0%
28%

Source: RBI, JM Financial; System CASA and Retail TD is taken as sum of system CASA + ‘Household – Individuals TDs’

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Indian Banking Sector 01 July 2019

Where do banks get their deposits from?

Exhibit 31. Market Share of coverage banks across top states covering c.80% of overall system deposits
Data as on Mar-19 Mar-19 Mar-19 Dec-18 Mar-18 Mar-19 Mar-19 Dec-18 Dec-18 Mar-19 Dec-18 Sep-18
Maharas
State Delhi Gujarat Bihar Haryana UP WB TN Karnataka Kerala AP Telangana
htra
Private Banks
HDFC Bank 12.7% 8.7% 7.9% 2.5% 14.3% 4.7% 4.9% 7.2% 8.2% 3.0% 2.6% 8.3%
Axis Bank 7.0% 3.8% 4.2% 2.0% 4.5% 2.1% 4.9% 3.6% 3.5% 2.1% 2.4% 4.3%
ICICI Bank 7.8% 5.3% 5.2% 3.0% 10.0% 3.7% 4.4% 5.3% 5.6% 2.2% 2.7% 6.4%
Yes bank 0.0% 3.3% 1.5% 0.0% 1.6% 0.0% 1.1% 0.9% 1.5% 0.8% 1.0% 1.4%
IndusInd Bank 3.6% 2.5% 1.0% 0.2% 1.7% 0.6% 0.7% 0.8% 0.5% 0.3% 0.5% 0.7%
Kotak Bank 3.6% 3.2% 2.5% 0.0% 2.4% 0.8% 0.8% 1.3% 2.5% 0.4% 1.2% 2.2%
Bandhan Bank 0.2% 0.2% 0.1% 0.6% 0.0% 0.0% 2.4% 0.0% 0.0% 0.0% 0.0% 0.0%
DCB Bank 0.5% 0.3% 0.4% 0.0% 0.1% 0.0% 0.0% 0.0% 0.1% 0.0% 0.1% 0.4%
City Union Bank 0.0% 0.1% 0.0% 0.0% 0.0% 0.0% 0.0% 3.8% 0.3% 0.1% 0.3% 0.2%
Federal Bank 0.8% 0.3% 0.3% 0.1% 0.5% 0.2% 0.4% 0.7% 0.6% 15.0% 0.2% 0.2%
PSU Banks
SBI 15.1% 13.8% 21.1% 31.6% 15.4% 21.7% 24.5% 18.9% 21.1% 27.0% 30.5% 31.7%
BOB 4.1% 4.0% 15.3% 3.2% 1.2% 7.0% 3.1% 2.2% 1.3% 1.4% 1.3% 1.8%
PNB 1.4% 6.6% 1.8% 11.6% 11.1% 12.1% 3.7% 1.4% 0.7% 1.4% 0.6% 1.6%
Canara Bank 3.4% 6.4% 1.4% 5.0% 3.3% 2.9% 2.0% 7.5% 13.0% 6.1% 2.7% 2.9%
Mkt share of
60% 58% 63% 60% 66% 56% 53% 54% 59% 60% 46% 62%
coverage banks
Source: RBI, respective SLBC, JM Financial

Exhibit 32. HDFC Bank – State-wise deposit breakup Exhibit 33. Axis Bank – State-wise deposit breakup

Maharashtra Maharashtra
18%
Gujarat Gujarat
26% 29%
31% UP UP
4% WB WB
4% TN TN
Karnataka Karnataka
2% 3%
Delhi Delhi
11% Kerala 2% 5% Kerala
6% 2%
Haryana 4% Haryana
5% 8%
8% Telangana 7% Telangana
6% 4% Others
5% 5%
Others

Source: Company, RBI, respective SLBC, JM Financial Source: Company, RBI, respective SLBC, JM Financial

Exhibit 34. ICICI Bank – State-wise deposit breakup Exhibit 35. Yes Bank – State-wise deposit breakup

Maharashtra Maharashtra
21% Gujarat Gujarat
27% 25%
UP 33% UP
WB WB
4% TN TN
Karnataka 5% Karnataka
4%
6% Delhi Delhi
2% 4% 0%
Kerala Kerala
10% 6% Haryana 3%2% 3% Haryana
6%
5% Telangana 2% Telangana
7% 6% 17%
Others Others

Source: Company, RBI, respective SLBC, JM Financial Source: Company, RBI, respective SLBC, JM Financial

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Indian Banking Sector 01 July 2019

Exhibit 36. IndusInd Bank – State-wise deposit breakup Exhibit 37. Kotak Bank – State-wise deposit breakup

Maharashtra 11% Maharashtra

23% Gujarat 4% Gujarat
UP UP
1% 3% 36%
41% WB WB
1% TN TN
2% Karnataka 16% Karnataka
1%
Delhi Delhi
15% Kerala Kerala
Haryana Haryana
2% 3% 4% Telangana 9% 4% 8% Telangana
3% 3% Others 4%
3% Others

Source: Company, RBI, respective SLBC, JM Financial Source: Company, RBI, respective SLBC, JM Financial

Exhibit 38. Bandhan Bank – State-wise deposit breakup Exhibit 39. SBI – State-wise deposit breakup

0%
8% 12%
Maharashtra Maharashtra
2% Gujarat Gujarat
UP 5% UP
38% 35%
WB WB
TN 8% TN
Karnataka Karnataka
Delhi 6% Delhi
43% Kerala Kerala
5%
Haryana Haryana
5% 6%
4% Telangana 1% Telangana
1% 5% 6%
Others Others

Source: Company, RBI, respective SLBC, JM Financial Source: Company, RBI, respective SLBC, JM Financial

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Indian Banking Sector 01 July 2019

Which are the top districts for deposits in India?

While the concentration of deposits in top districts has come down over the last few years,
the top 20 districts continue to be the major deposit generating pockets for the country
contributing c.51% of the overall deposits (c.58% as on Mar-14). Within the top 20 districts,
the top 7 cities (Mumbai, Delhi, Bangalore, Chennai, Kolkata, Hyderabad and Pune)
contribute the majority of the deposits at 40% as on Mar-19 (48% as on Mar-14).

Exhibit 40. Top 20 districts for deposits in India

Mar-14 Mar-19 Deposits
District State Total Deposits % of Deposit per Total Deposits % of Deposit per CAGR
(INR bn) deposits Capita (‘000s) (INR bn) deposits Capita (‘000s) FY14-19
Mumbai (incl. Suburban & Thane) Maharashtra 16,698 21% 710 18,488 15% 787 2%
New Delhi (incl. NCR) NCT Of Delhi 9,562 12% 479 14,421 11% 723 9%
Bangalore (Urban & Rural) Karnataka 3,515 4% 331 6,114 5% 576 12%
Chennai Tamil Nadu 2,512 3% 541 3,348 3% 721 6%
Kolkata West Bengal 2,207 3% 491 3,001 2% 667 6%
Hyderabad Telangana 1,831 2% 464 2,690 2% 682 8%
Pune Maharashtra 1,497 2% 159 2,544 2% 270 11%
Ahmedabad Gujarat 1,158 1% 160 1,849 1% 256 10%
Lucknow Uttar Pradesh 885 1% 193 1,452 1% 316 10%
North 24 Parganas West Bengal 669 1% 67 1,182 1% 118 12%
Patna Bihar 616 1% 105 1,165 1% 199 14%
Jaipur Rajasthan 612 1% 92 1,094 1% 165 12%
Ernakulam Kerala 568 1% 173 966 1% 294 11%
Khurda Odisha 503 1% 223 950 1% 422 14%
Vadodara Gujarat 563 1% 135 838 1% 201 8%
Medchal - Malkajgiri Telangana 433 1% 193 767 1% 341 12%
Nagpur Maharashtra 465 1% 100 756 1% 162 10%
Thiruvananthapuram Kerala 454 1% 137 753 1% 228 11%
Bhopal Madhya Pradesh 570 1% 240 714 1% 301 5%
Chandigarh Chandigarh 484 1% 459 686 1% 650 7%
Total of Top 20 Districts 45,802 58% 341 63,778 51% 475 7%
Overall Deposits - India 79,557 66 1,25,587 104 10%
Source: RBI, JM Financial; Population as per 2011 census

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Indian Banking Sector 01 July 2019

Cracking the deposit code in major metros – How has the pie been
split in MMR and Delhi?

Exhibit 41. Bank-wise market share of deposits for MMR (INR 18trn Exhibit 42. Bank-wise market share of deposits for Delhi (INR 11trn
pie) pie)

HDFC Bank 9% HDFC Bank

16%
Axis Bank 4% Axis Bank
ICICI Bank 5% ICICI Bank
34%
Yes Bank Yes Bank
9% 42% 3%
IndusInd Bank 3% IndusInd Bank
Kotak Bank 3% Kotak Bank

9% SBI SBI
BOB BOB
14%
4% 3% PNB PNB
1% 5% Canara Bank Canara Bank
4%
5% 4%
10% Others 6% 7% Others

Source: Company, RBI, respective SLBC, JM Financial; MMR includes suburban Mumbai and Thane Source: Company, respective SLBC, RBI, JM Financial; Delhi excludes Gurugram and Noida

Exhibit 43. Deposits from MMR and Delhi as % of overall deposits

Mumbai Delhi
40% 38%
34%
35%

30% 28% 28%

27% 16%
26% 25%
24% 24%
25% 17% 23% 7% 22%
11% 8% 13% 3%
20% 10% 18%
15% 12%
13%
15% 6%

10% 21% 20% 21%

16% 18% 15% 17% 6% 15%
5% 12% 12%
10% 2% 10%
4%
2% 2%
0%
Canara Bank
Yes Bank

Kotak Bank

PNB
HDFC Bank

IndusInd Bank

City Union Bank

Federal Bank
Bandhan Bank

DCB Bank

BOB
ICICI Bank

SBI
Axis Bank

Source: Company, RBI, SLBC, JM Financial

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Indian Banking Sector 01 July 2019

Valuation Table

Exhibit 44. JMFL : Valuations – Indian Banking sector

Target BVPS EPS P/B P/E
CMP (INR) Reco.
Private Banks (INR) FY19 FY20E FY21E FY19 FY20E FY21E FY19 FY20E FY21E FY19 FY20E FY21E
Axis Bank 808 BUY 865 259 301 347 18 45 56 3.1 2.7 2.3 44.4 18.1 14.3
HDFC Bank 2,486 BUY 2,600 548 619 709 77 93 112 4.5 4.0 3.5 32.1 26.7 22.2
ICICI Bank (standalone) 438 BUY 460 163 181 202 5 21 27 2.7 2.4 2.2 84.0 20.8 16.5
Kotak Mahindra Bank (consol.) 1,484 BUY 1,435 303 346 399 38 44 55 4.9 4.3 3.7 39.3 33.5 27.0
Yes Bank 109 BUY 265 116 134 148 7 12 16 0.9 0.8 0.7 14.6 8.7 6.7
Indusind Bank 1,436 BUY 1,860 440 544 640 60 90 114 3.3 2.6 2.2 23.8 16.0 12.6
Federal Bank 109 BUY 120 67 73 81 6 8 11 1.6 1.5 1.3 17.4 13.0 9.6
DCB Bank 235 BUY 250 93 106 123 11 14 19 2.5 2.2 1.9 22.4 16.6 12.6
City Union Bank 218 BUY 220 66 76 88 9 11 13 3.3 2.9 2.5 23.4 20.5 17.1
Bandhan Bank 544 BUY 710 94 99 125 16 21 29 5.8 5.5 4.4 33.3 25.7 19.1
PSU Banks
State Bank of India 362 BUY 385 220 248 277 1 29 34 1.6 1.5 1.3 NM 12.5 10.6
Punjab National Bank 81 HOLD 95 89 99 112 -22 10 12 0.9 0.8 0.7 NM 8.3 6.6
Canara Bank 285 HOLD 300 394 406 459 5 38 62 0.7 0.7 0.6 61.9 7.6 4.6
Source: Company, JM Financial

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Indian Banking Sector 01 July 2019

APPENDIX I

JM Financial Inst itut ional Secur ities Lim ited

(formerly known as JM Financial Securities Limited)
Corporate Identity Number: U67100MH2017PLC296081
Member of BSE Ltd., National Stock Exchange of India Ltd. and Metropolitan Stock Exchange of India Ltd.
SEBI Registration Nos.: Stock Broker - INZ000163434, Research Analyst – INH000000610
Registered Office: 7th Floor, Cnergy, Appasaheb Marathe Marg, Prabhadevi, Mumbai 400 025, India.
Board: +9122 6630 3030 | Fax: +91 22 6630 3488 | Email: jmfinancial.research@jmfl.com | www.jmfl.com
Compliance Officer: Mr. Sunny Shah | Tel: +91 22 6630 3383 | Email: sunny.shah@jmfl.com

Definition of ratings
Rating Meaning
Buy Total expected returns of more than 15%. Total expected return includes dividend yields.
Hold Price expected to move in the range of 10% downside to 15% upside from the current market price.
Sell Price expected to move downwards by more than 10%

Research Analyst(s) Certification

The Research Analyst(s), with respect to each issuer and its securities covered by them in this research report, certify that:

All of the views expressed in this research report accurately reflect his or her or their personal views about all of the issuers and their securities; and

No part of his or her or their compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed in this research
report.

Important Disclosures

This research report has been prepared by JM Financial Institutional Securities Limited (JM Financial Institutional Securities) to provide information about the
company(ies) and sector(s), if any, covered in the report and may be distributed by it and/or its associates solely for the purpose of information of the select
recipient of this report. This report and/or any part thereof, may not be duplicated in any form and/or reproduced or redistributed without the prior written
consent of JM Financial Institutional Securities. This report has been prepared independent of the companies covered herein.

JM Financial Institutional Securities is registered with the Securities and Exchange Board of India (SEBI) as a Research Analyst and a Stock Broker having trading
memberships of the BSE Ltd. (BSE), National Stock Exchange of India Ltd. (NSE) and Metropolitan Stock Exchange of India Ltd. (MSEI). No material disciplinary
action has been taken by SEBI against JM Financial Institutional Securities in the past two financial years which may impact the investment decision making of the
investor.

JM Financial Institutional Securities renders stock broking services primarily to institutional investors and provides the research services to its institutional
clients/investors. JM Financial Institutional Securities and its associates are part of a multi-service, integrated investment banking, investment management,
brokerage and financing group. JM Financial Institutional Securities and/or its associates might have provided or may provide services in respect of managing
offerings of securities, corporate finance, investment banking, mergers & acquisitions, broking, financing or any other advisory services to the company(ies)
covered herein. JM Financial Institutional Securities and/or its associates might have received during the past twelve months or may receive compensation from
the company(ies) mentioned in this report for rendering any of the above services.

JM Financial Institutional Securities and/or its associates, their directors and employees may; (a) from time to time, have a long or short position in, and buy or sell
the securities of the company(ies) mentioned herein or (b) be engaged in any other transaction involving such securities and earn brokerage or other
compensation or act as a market maker in the financial instruments of the company(ies) covered under this report or (c) act as an advisor or lender/borrower to,
or may have any financial interest in, such company(ies) or (d) considering the nature of business/activities that JM Financial Institutional Securities is engaged in,
it may have potential conflict of interest at the time of publication of this report on the subject company(ies).

Neither JM Financial Institutional Securities nor its associates or the Research Analyst(s) named in this report or his/her relatives individually own one per cent or
more securities of the company(ies) covered under this report, at the relevant date as specified in the SEBI (Research Analysts) Regulations, 2014.

The Research Analyst(s) principally responsible for the preparation of this research report and members of their household are prohibited from buying or selling
debt or equity securities, including but not limited to any option, right, warrant, future, long or short position issued by company(ies) covered under this report.
The Research Analyst(s) principally responsible for the preparation of this research report or their relatives (as defined under SEBI (Research Analysts) Regulations,
2014); (a) do not have any financial interest in the company(ies) covered under this report or (b) did not receive any compensation from the company(ies) covered
under this report, or from any third party, in connection with this report or (c) do not have any other material conflict of interest at the time of publication of this
report. Research Analyst(s) are not serving as an officer, director or employee of the company(ies) covered under this report.

While reasonable care has been taken in the preparation of this report, it does not purport to be a complete description of the securities, markets or
developments referred to herein, and JM Financial Institutional Securities does not warrant its accuracy or completeness. JM Financial Institutional Securities may
not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. This
report is provided for information only and is not an investment advice and must not alone be taken as the basis for an investment decision.

JM Financial Institutional Securities Limited Page 19

Indian Banking Sector 01 July 2019

The investment discussed or views expressed or recommendations/opinions given herein may not be suitable for all investors. The user assumes the entire risk of
any use made of this information. The information contained herein may be changed without notice and JM Financial Institutional Securities reserves the right to
make modifications and alterations to this statement as they may deem fit from time to time.

This report is neither an offer nor solicitation of an offer to buy and/or sell any securities mentioned herein and/or not an official confirmation of any transaction.

This report is not directed or intended for distribution to, or use by any person or entity who is a citizen or resident of or located in any locality, state, country or
other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject JM Financial Institutional
Securities and/or its affiliated company(ies) to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be
eligible for sale in all jurisdictions or to a certain category of investors. Persons in whose possession this report may come, are required to inform themselves of
and to observe such restrictions.

Persons who receive this report from JM Financial Singapore Pte Ltd may contact Mr. Ruchir Jhunjhunwala (ruchir.jhunjhunwala@jmfl.com) on +65 6422 1888 in
respect of any matters arising from, or in connection with, this report.

Additional disclosure only for U.S. persons: JM Financial Institutional Securities has entered into an agreement with JM Financial Securities, Inc. ("JM Financial
Securities"), a U.S. registered broker-dealer and member of the Financial Industry Regulatory Authority ("FINRA") in order to conduct certain business in the
United States in reliance on the exemption from U.S. broker-dealer registration provided by Rule 15a-6, promulgated under the U.S. Securities Exchange Act of
1934 (the "Exchange Act"), as amended, and as interpreted by the staff of the U.S. Securities and Exchange Commission ("SEC") (together "Rule 15a-6").

This research report is distributed in the United States by JM Financial Securities in compliance with Rule 15a-6, and as a "third party research report" for
purposes of FINRA Rule 2241. In compliance with Rule 15a-6(a)(3) this research report is distributed only to "major U.S. institutional investors" as defined in Rule
15a-6 and is not intended for use by any person or entity that is not a major U.S. institutional investor. If you have received a copy of this research report and are
not a major U.S. institutional investor, you are instructed not to read, rely on, or reproduce the contents hereof, and to destroy this research or return it to JM
Financial Institutional Securities or to JM Financial Securities.

This research report is a product of JM Financial Institutional Securities, which is the employer of the research analyst(s) solely responsible for its content. The
research analyst(s) preparing this research report is/are resident outside the United States and are not associated persons or employees of any U.S. registered
broker-dealer. Therefore, the analyst(s) are not subject to supervision by a U.S. broker-dealer, or otherwise required to satisfy the regulatory licensing
requirements of FINRA and may not be subject to the Rule 2241 restrictions on communications with a subject company, public appearances and trading
securities held by a research analyst account.

JM Financial Institutional Securities only accepts orders from major U.S. institutional investors. Pursuant to its agreement with JM Financial Institutional Securities,
JM Financial Securities effects the transactions for major U.S. institutional investors. Major U.S. institutional investors may place orders with JM Financial
Institutional Securities directly, or through JM Financial Securities, in the securities discussed in this research report.

Additional disclosure only for U.K. persons: Neither JM Financial Institutional Securities nor any of its affiliates is authorised in the United Kingdom (U.K.) by the
Financial Conduct Authority. As a result, this report is for distribution only to persons who (i) have professional experience in matters relating to investments
falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended, the "Financial Promotion Order"), (ii)
are persons falling within Article 49(2)(a) to (d) ("high net worth companies, unincorporated associations etc.") of the Financial Promotion Order, (iii) are outside
the United Kingdom, or (iv) are persons to whom an invitation or inducement to engage in investment activity (within the meaning of section 21 of the Financial
Services and Markets Act 2000) in connection with the matters to which this report relates may otherwise lawfully be communicated or caused to be
communicated (all such persons together being referred to as "relevant persons"). This report is directed only at relevant persons and must not be acted on or
relied on by persons who are not relevant persons. Any investment or investment activity to which this report relates is available only to relevant persons and will
be engaged in only with relevant persons.

Additional disclosure only for Canadian persons: This report is not, and under no circumstances is to be construed as, an advertisement or a public offering of the
securities described herein in Canada or any province or territory thereof. Under no circumstances is this report to be construed as an offer to sell securities or as
a solicitation of an offer to buy securities in any jurisdiction of Canada. Any offer or sale of the securities described herein in Canada will be made only under an
exemption from the requirements to file a prospectus with the relevant Canadian securities regulators and only by a dealer properly registered under applicable
securities laws or, alternatively, pursuant to an exemption from the registration requirement in the relevant province or territory of Canada in which such offer or
sale is made. This report is not, and under no circumstances is it to be construed as, a prospectus or an offering memorandum. No securities commission or
similar regulatory authority in Canada has reviewed or in any way passed upon these materials, the information contained herein or the merits of the securities
described herein and any representation to the contrary is an offence. If you are located in Canada, this report has been made available to you based on your
representation that you are an ‚accredited investor‛ as such term is defined in National Instrument 45-106 Prospectus Exemptions and a ‚permitted client‛ as
such term is defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Under no circumstances is the
information contained herein to be construed as investment advice in any province or territory of Canada nor should it be construed as being tailored to the
needs of the recipient. Canadian recipients are advised that JM Financial Securities, Inc., JM Financial Institutional Securities Limited, their affiliates and authorized
agents are not responsible for, nor do they accept, any liability whatsoever for any direct or consequential loss arising from any use of this research report or the
information contained herein.

JM Financial Institutional Securities Limited Page 20