Research and consultancy, Tabbush Report

Daniel Tabbush

Research and consultancy

Tabbush Report

We provide research and consultancy on Asian banks. Our focus is on what we call “Asian bank research, without the noise.” We are interested in the most critical swing-factors for banks, the NPL and credit cycle, and where we believe there is a gap between perception and reality. We often focus on the less studied components of bank financial statements.  Our research is highly thematic, sometimes examining unlisted banks and companies as a window on mainstream banks. 

Being independent allows us to look at smaller banks, often overlooked by others. Analysis of BIS bank guidelines in the context of Asia, is also a focal point, while we also analyze global banks operating in the region. We use what we believe is the most comprehensive, reliable financials database, SNL Financial. S&P Capital IQ augments our database, with corporate data and CEIC, with economics. 

Asian bank research, without the noise.

Thematic (Sector/Industry)

India was in a banking crisis before 2020 and the impact of the current crisis is far worse than in most other countries. Quarterly data of banks reveals dramatic deterioration in credit metrics during March 2021.

India was in a banking crisis before 2020 and the impact of the current crisis is far worse than in most other countries. Quarterly data of banks reveals dramatic deterioration in credit metrics during March 2021. 

Specialist in Indian Banking and Economic Research

Hemindra Hazari

While <a href="https://www.smartkarma.com/entities/axis-bank-ltd" target="_blank" data-smartkarma-citation="entities:768:1" rel="noopener">Axis Bank Ltd (AXSB IN)</a>  has recovered from its corporate non-performing asset (NPA) crisis, it seems to be in the midst of a management attrition problem, partly explained by significant <a href="https://thewire.in/banking/will-axis-bank-right-the-ship-with-its-mid-level-management-shake-up" target="_blank" rel="noopener">sackings</a> in FY2020. Staff turnover levels have been steadily rising in FY2018 – FY2020 (data for FY2021 not yet released). What is worrying is the attrition is across management strata, and covering all age groups. In our sample of banks ( <a href="https://www.smartkarma.com/entities/hdfc-bank-ltd-4b6b7a92-9087-468d-9dbe-ab169e77f014" target="_blank" data-smartkarma-citation="entities:558:1" rel="noopener">HDFC Bank (HDFCB IN)</a> , Axis Bank, <a href="https://www.smartkarma.com/entities/indusind-bank-ltd" target="_blank" data-smartkarma-citation="entities:1558:1" rel="noopener">Indusind Bank (IIB IN)</a> and <a href="https://www.smartkarma.com/entities/yes-bank-ltd" target="_blank" data-smartkarma-citation="entities:767:1" rel="noopener">Yes Bank (YES IN)</a> ) which disclose this data, only Yes Bank has worse attrition than Axis Bank, which is understandable given Yes Bank’s precarious situation till FY2020.It is commendable of both Axis Bank and Yes Bank to have voluntarily provided detailed disclosure of attrition (unlike <a href="https://www.smartkarma.com/entities/icici-bank-ltd" target="_blank" data-smartkarma-citation="entities:547:1" rel="noopener">ICICI Bank Ltd (ICICIBC IN)</a> and <a href="https://www.smartkarma.com/entities/kotak-mahindra-bank-ltd" target="_blank" data-smartkarma-citation="entities:126:1" rel="noopener">Kotak Mahindra Bank (KMB IN)</a> , which provided no disclosures in this regard), enabling a meaningful analysis. The consistent rise in attrition in Axis Bank is a serious human resource (HR) problem reflecting on the bank’s <a href="https://www.axisbank.com/media-centre/board-of-directors" target="_blank" rel="noopener">board of directors</a>. Responding to a query posed by this analyst on this subject, the bank has stated that it “does not comment on internal administrative matters”. This analyst believes the high attrition can be attributed to (i) sackings, (ii) poor selection practices by the Human Resources division (responsibility of <a href="https://www.linkedin.com/in/rajesh-dahiya-4911961/?originalSubdomain=in" target="_blank" rel="noopener">Rajesh Dahiya</a>  since June 2010) in identifying appropriate candidates (especially at the entry level of sales where attrition was a shocking 69% in FY2020), (iii) excessive pressure to meet over ambitious targets, (iv) difficult working conditions, (v) poor training and (vi) inadequate resources for its staff.Axis Bank’s FY2020 annual report maintains that “its employees remain the most critical drivers for growth and success” and are the “catalyst which builds talent”. However, inexplicably, the board of directors have presided over large-scale staff attrition and allowed the attrition to keep rising. Amitabh Chaudhry took over as Chief Executive Officer (CEO), Axis Bank on January 1, 2019, and in the first week of April, 2019  <a href="https://economictimes.indiatimes.com/industry/banking/finance/banking/axis-bank-asks-more-than-50-mid-level-managers-to-leave/articleshow/68731729.cms?utm_source=whatsapp_app&amp;utm_medium=social&amp;utm_campaign=socialsharebuttons" target="_blank" rel="noopener">media reports</a> indicated significant forced removals. It is surprising that lower levels of management bore the brunt while senior executives closely associated with the previous CEO’s strategy got away. Banking is all about trust, and customers become uncomfortable when there is a constant churn of staff who service them. Nor is it healthy for any institution to have a high and consistently increasing attrition, which is a symptom of an underlying problem and signifies waste of expenditures incurred in hiring and training staff. It is also surprising that credit rating analysts have not red flagged this development. These issues can no longer be tucked away in some obscure corner in a company’s website, but will have to be mandatorily included in company’s annual reports from FY2023 as per SEBI’s <a href="https://www.sebi.gov.in/media/press-releases/may-2021/sebi-issues-circular-on-business-responsibility-and-sustainability-reporting-by-listed-entities-_50097.html" target="_blank" rel="noopener">recent</a>  business responsibility social reporting (BRSR).  By then one hopes the board of directors at Axis Bank would have woken up and addressed this critical issue.

While Axis Bank Ltd (AXSB IN)  has recovered from its corporate non-performing asset (NPA) crisis, it seems to be in the midst of a management attrition problem, partly explained by significant sackings in FY2020. Staff turnover levels have been steadily rising in FY2018 – FY2020 (data for FY2021 not yet released). What is worrying is the attrition is across management strata, and covering all age groups. In our sample of banks ( HDFC Bank (HDFCB IN) , Axis Bank, Indusind Bank (IIB IN) and Yes Bank (YES IN) ) which disclose this data, only Yes Bank has worse attrition than Axis Bank, which is understandable given Yes Bank’s precarious situation till FY2020.It is commendable of both Axis Bank and Yes Bank to have voluntarily provided detailed disclosure of attrition (unlike ICICI Bank Ltd (ICICIBC IN) and Kotak Mahindra Bank (KMB IN) , which provided no disclosures in this regard), enabling a meaningful analysis. The consistent rise in attrition in Axis Bank is a serious human resource (HR) problem reflecting on the bank’s board of directors. Responding to a query posed by this analyst on this subject, the bank has stated that it “does not comment on internal administrative matters”. This analyst believes the high attrition can be attributed to (i) sackings, (ii) poor selection practices by the Human Resources division (responsibility of Rajesh Dahiya  since June 2010) in identifying appropriate candidates (especially at the entry level of sales where attrition was a shocking 69% in FY2020), (iii) excessive pressure to meet over ambitious targets, (iv) difficult working conditions, (v) poor training and (vi) inadequate resources for its staff.Axis Bank’s FY2020 annual report maintains that “its employees remain the most critical drivers for growth and success” and are the “catalyst which builds talent”. However, inexplicably, the board of directors have presided over large-scale staff attrition and allowed the attrition to keep rising. Amitabh Chaudhry took over as Chief Executive Officer (CEO), Axis Bank on January 1, 2019, and in the first week of April, 2019  media reports indicated significant forced removals. It is surprising that lower levels of management bore the brunt while senior executives closely associated with the previous CEO’s strategy got away. Banking is all about trust, and customers become uncomfortable when there is a constant churn of staff who service them. Nor is it healthy for any institution to have a high and consistently increasing attrition, which is a symptom of an underlying problem and signifies waste of expenditures incurred in hiring and training staff. It is also surprising that credit rating analysts have not red flagged this development. These issues can no longer be tucked away in some obscure corner in a company’s website, but will have to be mandatorily included in company’s annual reports from FY2023 as per SEBI’s recent  business responsibility social reporting (BRSR).  By then one hopes the board of directors at Axis Bank would have woken up and addressed this critical issue.

Why Are Axis Bank’s Directors Mum About the Extraordinary Staff Churn?

While most banks globally are seeing sharply lower credit costs in the March 2021 quarter, this is not the case in India. There are discreet risks in India related to the impact of poor air quality and the syndemic, but also with respect to pre-existing financial weakness and limited central bank relief.

While most banks globally are seeing sharply lower credit costs in the March 2021 quarter, this is not the case in India. There are discreet risks in India related to the impact of poor air quality and the syndemic, but also with respect to pre-existing financial weakness and limited central bank relief. 

The integrity of audits in private sector banks and non-bank financial companies (including housing finance) has received a major boost, while large global and domestic audit firms have been dealt a body blow by the Reserve Bank of India’s <a href="https://rbidocs.rbi.org.in/rdocs/notification/PDFs/NOTI258A67AD30976F44929FA2AB2B41DC805D.PDF" target="_blank" rel="noopener">new</a> guidelines for the appointment of statutory auditors for the commercial banks and NBFCs. In future the executive and founder-management of private sector financial intermediaries will find it more difficult to exert influence on their statutory auditors. 
Henceforth, all the audit firm affiliates which were treated as separate entities, but under the same network, will be treated as a single entity. It was common practice for one entity in the audit firm group to be awarded the audit while other entities in the group were given lucrative assignments while simultaneously issuing a “no conflict of interest certificate.” Such an arrangement compromised the entire edifice of audit, and there were no disclosures. The new system entails providing such disclosures to the RBI prior to getting the regulator’s approval.
Till FY2019, global audit firms had a stranglehold on the market of large private sector banks. But their negligent conduct, bordering on complicity, in major corporate frauds in India and abroad has led to a valid rethink regarding their capabilities. Accordingly, the regulator’s guidelines released on April 27, 2021 will curtail their business in the Indian financial sector.

The integrity of audits in private sector banks and non-bank financial companies (including housing finance) has received a major boost, while large global and domestic audit firms have been dealt a body blow by the Reserve Bank of India’s new guidelines for the appointment of statutory auditors for the commercial banks and NBFCs. In future the executive and founder-management of private sector financial intermediaries will find it more difficult to exert influence on their statutory auditors. 
Henceforth, all the audit firm affiliates which were treated as separate entities, but under the same network, will be treated as a single entity. It was common practice for one entity in the audit firm group to be awarded the audit while other entities in the group were given lucrative assignments while simultaneously issuing a “no conflict of interest certificate.” Such an arrangement compromised the entire edifice of audit, and there were no disclosures. The new system entails providing such disclosures to the RBI prior to getting the regulator’s approval.
Till FY2019, global audit firms had a stranglehold on the market of large private sector banks. But their negligent conduct, bordering on complicity, in major corporate frauds in India and abroad has led to a valid rethink regarding their capabilities. Accordingly, the regulator’s guidelines released on April 27, 2021 will curtail their business in the Indian financial sector.

RBI Norms - Audit Giants Can’t Continue Their Cosy Arrangements with Private Banks and NBFCs

Silver Point

Thomas J. Monaco

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

*Can Kicked Less Far: On March 23, 2021, the Supreme Court in a final ruling  rejected pleas for a complete waiver of interest on loans under moratorium; ; and*Good News For Banks Is Still Bad News: Despite the favorable RBI Supreme Court ruling, Indian financial sector credit quality remains amongst the worst in Asia and globally. Given the now increased interest pressure on those corporates which were given waivers, it is all but assured that we can add those to the woodpile of Indian NPLs. Massive capital raises need to occur within the sector.

*Can Kicked Less Far: On March 23, 2021, the Supreme Court in a final ruling  rejected pleas for a complete waiver of interest on loans under moratorium; ; and*Good News For Banks Is Still Bad News: Despite the favorable RBI Supreme Court ruling, Indian financial sector credit quality remains amongst the worst in Asia and globally. Given the now increased interest pressure on those corporates which were given waivers, it is all but assured that we can add those to the woodpile of Indian NPLs. Massive capital raises need to occur within the sector.  

Reserve Bank of India – Heads You Win, Tails I Lose

India

YES BANK Limited provides banking services. The Bank offers deposits, personal loans, e-banking, trade finance, corporate, and business banking services. YES BANK serves the food and agribusiness, life sciences, healthcare, biotechnology, telecommunications, media, information technology, and infrastructure development industries in India.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Yes Bank (YES IN)

India Banks – Still In Crisis?

India was in a banking crisis before 2020 and the current crisis is worse than in many other countries. Unlike most regions, India latest quarterly...

Daniel Tabbush

Why Are Axis Bank’s Directors Mum About the Extraordinary Staff Churn?

Stakeholders, including credit rating agencies, need to be concerned with such high attrition rates in Axis Bank, as banking is staff intensive,...

Hemindra Hazari

India – Not Time

There are discreet risks in India related to the impact of poor air quality and the syndemic, but also with respect to pre-existing financial...

Daniel Tabbush

RBI Norms - Audit Giants Can’t Continue Their Cosy Arrangements with Private Banks and NBFCs

The integrity of audits in banks & NBFCs has received a major boost, while global audit firms have been dealt a body blow by the RBI’s new...

Hemindra Hazari

Reserve Bank of India – Heads You Win, Tails I Lose

RESERVE BANK OF INDIA: The Supreme Court rejected pleas for a complete waiver of interest on loans under moratorium. Nevertheless, the Indian...

Thomas J. Monaco

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)