Recharging the Wholesale Banking Fee Engine

Samarth Mehta | AHEAD Intern

Department – Strategy & New Initiatives
Mentored by – Premchand Rao, Souvik De
Date – 5th June, 2020

Axis Bank Document Classification | Confidential

Project Landscaping and Problem Statement Analysis
This study involves the analysis of the wholesale banking department of Axis, benchmarking it with national and international competitors
on the basis of banking fees and identifying gaps and suggesting strategies to fill the same.
DELIVERABLES
NATIONAL PEERS
• Position Axis Bank with respect to its peers in the national
scenario
• Device new products that can be offered to increase the share
of Wholesale Banking Fees
• Suggest constructive strategies to strengthen the wholesale
banking position of Axis
INTERNATIONAL PEERS
• Understanding the performance of International Banks &
obtaining some insights from them through the growth drivers
• Understanding regional dominance and explore possibilities of
expansions
• Capturing new product or services offered by them and trying
to integrate them in the existing framework of the bank
TECHNOLOGICAL DISRUPTIONS
• Implementing new product and services that are backed up by
technology to increase fee share and component
APPROACH
NATIONAL PEERS
• Benchmarking Axis Bank with the national peers on the basis of
Wholesale Banking Fees – 5 peers selected
• Doing a Product and Services cross analysis between the banks
• Understanding trends in the fees, fees to advances and fees to
total income
INTERNATIONAL PEERS
• Benchmarking Axis Bank with the International peers on the
basis of Wholesale Banking Fees
• Doing a Product and Services cross analysis between the banks
• Understanding the trends in Wholesale Banking on the basis of
location and services offered by the Banks
• Capturing Market Share to understand the standpoint of these
banks
TECHNOLOGICAL DISRUPTIONS
• Understanding recent Technological Trends in the domain of
Wholesale Banking and seeing case studies of how banks are
offering different products & services to stay ahead in the curve
Axis Bank Document Classification | Confidential 1
Comparison of Bank Fee growth and Fee as a percentage of advances for the
national private banks of India
5.00%
4.50% 4.53% Fee as a % of Advances ANALYSIS
4.00%
3.50% 3.31%
3.00% 3.00%
Axis HDFC Bank has seen the highest
HDFC
2.50% 2.45% growth in Fee Income primarily due
2.21%
2.18% ICICI
2.00% 2.04%
1.74%
1.69% Kotak
to the volume size and market
1.50%
1.00% 1.05% IndusInd history
0.50%
0.00%
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Axis Bank started low on the fee
progression metrics but increased
In Rupee billion
Fee Progression sustainably due to product offerings
30
25
20
15 Kotak has seen a steep fall in its
10
Fees as a % of advances metric
because Advances grew faster than
5
fee income
0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

IndusInd has seen a rise in its Fees as

INSIGHTS a % of advances metrics suggesting
- For most of the banks, Fee as a % of Advances has fallen due to an increase in Advances at a
Fees grew at a faster rate in
higher rate than increase in Fee
comparison to the growth in
- Another reason for the fall of Fee % is that banks are trying to capture a higher market share
Advances
by offering no fee products
- Increasing competition from Fintech Co. and other Banking Institutions
Source: Annual Reports
Axis Bank Document Classification | Confidential 2
Comparison of International Peers and identifying trends in different fee items and
analysing the growth drivers across International Banks

Wholesale Banking Fee breakup for International Banks Indian Market Landscaping
FUNDS UNDER MANAGEMENT IMPORTS & EXPORTS • Share of Investment Banking Fees in terms of national
wholesale banks is significantly less. This share for the
ACCOUNT TRANSACTIONS INSURANCE AGENCY national banks can be increased by creating a separate niche
for themselves to compare with the likes of frontline IBs.
CARD INCOME REMITTANCES
• Indian Banks can enter the Insurance Business through
CREDIT FACILITY GLOBAL CUSTODY partnerships, like HSBC has partnered with AXA
Insurance to provide Business Insurance services to
UNIT TRUSTS INVESTMENT BANKING FEE
corporate customers

AMERICA EUROPE & UK APAC

• Citi is the market leader in • HSBC has a diverse fee portfolio • DBS focusing more on Tech based
majority of the Wholesale being the market leader in products thereby increasing
Banking services followed by majority of the services offered number of wholesale accounts by
JPMC • DB saw higher Professional and 15% resulting in a rise of fees by
• Wells Fargo is leading the POS Management fees against lower 2%
business due to increased sales of deposit revenues & interest • Net Fee income increased by
Credit Cards and larger ticket • Barclyas’s banking fees increased 2.05% for Bank Of China
sizes and its Clover POS System 12% reflecting improved primarily attributed to cards
• JPMC has seen a higher rate of performance in debt capital income
management fees on higher markets and advisory, despite a • Bank of China is the market
market levels as well as increase declining overall fee pool leader in majority of the
in brokerage Wholesale Bank services

Source: Annual Reports, Investor Presentation & Call Transcripts Note: Assuming top 4 banks in each region have a 40% Market Share
Axis Bank Document Classification | Confidential 3
Analysis of various components of Axis Bank Wholesale Fees and identifying
growth drivers towards the same
INSIGHTS
Card Fee Progression SME Fee Growth
2020 2020
• ICICI Bank has the
2019
highest share of Fees as a
2019
Card Fee Income Growth
SME Fee Growth % of Total Income in the
national market followed
2018 2018
by IndusInd Bank
• Transactional Banking
2017 2017
Fee has been the anchor
0 500 1000 1500 2000 2500 3000 3500 0 50 100 150 200 250 300 350 400 450 500 for Wholesale Fees
• Corporate Credit Fee
gradually increasing
Transactional Banking Fee Progression Corporate Credit Fee Progression because of improvement
2020 2020 in Books & better
customers
2019 2019 • Credit Card fee in Q4 has
Transactional Banking Corporate Credit Fee seen a fall due to the
2018 Fee Growth 2018
Progression Covid situation
• Wholesale Bank Fee
2017 2017 contributed 13% to the
overall fee collection
0 0 0 0 0 0 0 0 0 0 0
20 40 60 8 0 1 0 0 1 2 0 1 4 0 1 6 0 18 0 20 0

Source: Annual Reports, Investor Presentation & Call Transcripts

Axis Bank Document Classification | Confidential 4
Suggestions towards novel fee generation methodologies for Axis
PRODUCT, SERVICE & STRATEGIC SUGGESTIONS
Cheque Express
A one stop solution where a
customer only generates information
about a cheque-processing and
payment is done by the bank
Smart City Solutions
Kotak Mahindra Bank is the prime
banking partner & institution in the
GIFT city of Gujarat
Card product suite
Expanding the Credit & Debit card
product suite, as it is one of the
biggest fee & revenue driver
Solutions for Clubs, Societies &
Religious Institutions
Tailor made products to handle
transactions of large organisations
like Clubs and Religious Institutions
Source: Capegemini Report, BCG, Bain Reports
Financial Well-Being
A personalized program to help
customers during times of
Financial turmoil
Expanding the API offering
HSBC has close to 371 APIs open
for their Wholesale Banking
customers
HSBC SERAI
Creating a platform like LinkedIn
for Wholesale Banking trade
customers
Brokerage Income
It has seen a rise across all
geographies. Expansion in this
domain can prove to be
profitable for Axis
TECH INNOVATIONS
Blockchain Solutions to facilitate cross border payments
& exchanges
- Standard Chartered completed its first cross-border letter
of credit blockchain transaction in the oil industry by
leveraging the Voltron platform for a seamless exchange
of information between players
Cloud Based services to reduce risk and improve
innovation
- South Africa’s Standard Bank shifted its workload
including customer facing platforms onto the Amazong
Web Services for seamless functionality
Bank Fintech Partnerships to promote new products in
the wholesale Banking Domain
- Kotak Mahindra Bank’s Innovative Labs provides Fintech
Start-ups with a platform to showcase and work on
products with Kotak’s management and get it released in
the market if sustainable
Artificial Intelligence based products for better
functionality and higher revenues
- Siam Commercial Bank has a new tech product in their
Wholesale Banking division, called Sherlock which
assists RMs to provide better solutions to their customers
through predictive analysis & benchmarking
Axis Bank Document Classification | Confidential 5
Appendix
APPENDIX – AMERICA WHOLESALE BANK FEE BREAKUP

100%
90% Others
80%
70%
GS Consolidated
60% JPMC Consolidate
50%
40% Wells
30%
Citi
20%
10%
0% Credit facilities

Imports/exports
Broking income
Cards

Unit trusts
Funds under management

Investment Banking Fees

Account services/Transaction

Insurance agency commission

Other
Axis Bank Document Classification | Confidential
APPENDIX – EUROPE & UK WHOLESALE BANK FEE BREAKUP

100%

90% Others
80%
Standard Chartered
70%

60%
DB
50% Barclays
40%
HSBC
30%

20%

10%

0%
t es
en o n
r ds
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e
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ees he
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Axis Bank Document Classification | Confidential

APPENDIX – APAC WHOLESALE BANK FEE BREAKUP
100%

90%

80%
Others DBS
70%

60% ICBC BOC

50%
ANZ Consolidated
40%

30%

20%

10%

0%
t s es
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ar
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Axis Bank Document Classification | Confidential

Thank You