Specialist in Indian Banking and Economic Research

Hemindra Hazari

Most private sector banks withhold the remuneration details of senior executives in the annual reports. However, shareholders can specifically request this <a href="https://www.mca.gov.in/Ministry/pdf/NCARules_Chapter13.pdf" target="_blank" rel="noopener">disclosure</a> from companies. The remuneration disclosure provides valuable information on the quantum of monetary compensation, revealing how senior managers have been appraised and compensated. In <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>, the scale of remuneration reveals how <a href="https://www.indusind.com/iblogs/bloggers/mr-ramaswamy-meyyappan/" target="_blank" rel="noopener">Ramaswamy Meyyappan</a> (Chief Risk Officer) and the corporate credit team (initially led by <a href="https://www.linkedin.com/in/suhailchander/?originalSubdomain=in" target="_blank" rel="noopener">Suhail Chander</a> and subsequently by <a href="https://www.linkedin.com/in/roopa-satish-847139121/?originalSubdomain=in" target="_blank" rel="noopener">Roopa Satish</a>) were handsomely rewarded (FY2017-FY2019) for doing high-risk, poor quality loans to companies like <a href="https://hemindrahazari.com/2021/06/16/cg-power-loan-scandal-indusind-bank-pioneers-lending-without-documents-to-a-firm-with-no-assets/" target="_blank" rel="noopener">CG Middle East</a>   (US$ 40 mn in FY2018; the loan is being  investigated by the Securities and Exchange Board of India),  <a href="https://hemindrahazari.com/2019/04/25/indusind-bank-one-more-disturbing-lapse-of-judgment-by-the-banker-of-the-year/" target="_blank" rel="noopener">Sprit Infrapower</a> (Rs 5 bn loan to unlisted company of founders of Zee media in FY2019) and <a href="https://hemindrahazari.com/2018/10/17/are-indusind-banks-credit-and-risk-departments-run-by-financial-illiterates/" target="_blank" rel="noopener">IL&amp;FS</a>  (Rs 20 bn bridge loan in FY2019). Thereafter their remuneration declined in FY2020, and for some it recovered in FY2021. Indusind Bank has declined to provide any clarity on the reasons for the increase and decrease in individual remuneration. When corporate banking’s credit costs in FY2019 shot up by 4.6x and Profit Before Tax (PBT) of the division declined by 60% to Rs 6.6 bn, Roopa Satish, the Country Head – Corporate, Institutions and Investment Banking, remuneration increased by 16% to Rs 52.3 mn. In FY2020 her remuneration declined by 37% to Rs 32.9 mn.  More importantly, despite the significant financial and reputational loss to the bank from dodgy corporate loans, none of the concerned executives was sacked; the only apparent punishment was a reduction in their already inflated remuneration. These events demonstrate poor oversight by the important sub-committees of the board of directors such as Committee of Directors (CoD), Risk Management and the Nomination and Remuneration (NRC). The coterie, consisting of mainly former ABN AMRO Bank colleagues, are well protected from getting the axe.The lesson to stakeholders is that, when times are good, senior executives will be richly rewarded, and when times turn sour on account of their incompetence and/or complicity, they will still retain their jobs. The only punishment will be a reduction in their remuneration. As long as such individuals are blessed by the CEO, their jobs are secure, and there is negligible accountability for their disastrous acts which result in losses to the bank and to shareholders.

Most private sector banks withhold the remuneration details of senior executives in the annual reports. However, shareholders can specifically request this disclosure from companies. The remuneration disclosure provides valuable information on the quantum of monetary compensation, revealing how senior managers have been appraised and compensated. In Indusind Bank (IIB IN), the scale of remuneration reveals how Ramaswamy Meyyappan (Chief Risk Officer) and the corporate credit team (initially led by Suhail Chander and subsequently by Roopa Satish) were handsomely rewarded (FY2017-FY2019) for doing high-risk, poor quality loans to companies like CG Middle East   (US$ 40 mn in FY2018; the loan is being  investigated by the Securities and Exchange Board of India),  Sprit Infrapower (Rs 5 bn loan to unlisted company of founders of Zee media in FY2019) and IL&amp;FS  (Rs 20 bn bridge loan in FY2019). Thereafter their remuneration declined in FY2020, and for some it recovered in FY2021. Indusind Bank has declined to provide any clarity on the reasons for the increase and decrease in individual remuneration. When corporate banking’s credit costs in FY2019 shot up by 4.6x and Profit Before Tax (PBT) of the division declined by 60% to Rs 6.6 bn, Roopa Satish, the Country Head – Corporate, Institutions and Investment Banking, remuneration increased by 16% to Rs 52.3 mn. In FY2020 her remuneration declined by 37% to Rs 32.9 mn.  More importantly, despite the significant financial and reputational loss to the bank from dodgy corporate loans, none of the concerned executives was sacked; the only apparent punishment was a reduction in their already inflated remuneration. These events demonstrate poor oversight by the important sub-committees of the board of directors such as Committee of Directors (CoD), Risk Management and the Nomination and Remuneration (NRC). The coterie, consisting of mainly former ABN AMRO Bank colleagues, are well protected from getting the axe.The lesson to stakeholders is that, when times are good, senior executives will be richly rewarded, and when times turn sour on account of their incompetence and/or complicity, they will still retain their jobs. The only punishment will be a reduction in their remuneration. As long as such individuals are blessed by the CEO, their jobs are secure, and there is negligible accountability for their disastrous acts which result in losses to the bank and to shareholders.

CEO’s Coterie: IndusInd’s High Flying High Risk Takers Reap Rich Rewards But Negligible Penalties

Silver Point

Thomas J. Monaco

Independent Insight Provider

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

Equity Bottom-Up

*ChallengesMount: HDFC Ltd (HDFC.IN) [HDFC] reported FY 1Q22 results of INR 30.0 bn, decreasing INR 1.8 bn (5.6%) on a linked quarter basis. However, core operating results came in at INR 24.7 bn, declining INR 2.7 bn (9.9%) over the same period – despite net interest income improving INR 819 mn  (2.0%) off of a 20 bp NIM improvement to 3.70% and managed loan growth of 0.2%; and*Credit Quality Worsens: Given the INR 5.0 bn in NCOs during FY 1Q22, net new NPLs accelerated to INR 19.0 bn and increased 65.5% on an annualized basis versus INR 3.6 bn or 14.2% on an annualized basis in FY 1Q21. We would have preferred that HDFC be even more vigilant given the continued growing uncertainty of COVID-19. As such, we still find that HDFC’s reserve still needs shoring up by another INR 83 bn or over three quarters of core operating results.

*ChallengesMount: HDFC Ltd (HDFC.IN) [HDFC] reported FY 1Q22 results of INR 30.0 bn, decreasing INR 1.8 bn (5.6%) on a linked quarter basis. However, core operating results came in at INR 24.7 bn, declining INR 2.7 bn (9.9%) over the same period – despite net interest income improving INR 819 mn  (2.0%) off of a 20 bp NIM improvement to 3.70% and managed loan growth of 0.2%; and*Credit Quality Worsens: Given the INR 5.0 bn in NCOs during FY 1Q22, net new NPLs accelerated to INR 19.0 bn and increased 65.5% on an annualized basis versus INR 3.6 bn or 14.2% on an annualized basis in FY 1Q21. We would have preferred that HDFC be even more vigilant given the continued growing uncertainty of COVID-19. As such, we still find that HDFC’s reserve still needs shoring up by another INR 83 bn or over three quarters of core operating results. 

External broker reports(aggregated public sources), ICICI Securities Ltd

ICICI Securities Limited

External broker reports(aggregated public sources)

About the stock: IndusInd Bank is a Hinduja group promoted newer age private sector bank and is the fifth largest private bank in India.<ul><li>Vehicle finance forms around 30% of overall loans</li><li>Strong pan-India presence with 5221 branches as on June 2021</li></ul><div class="content-highlight">Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.</div>

About the stock: IndusInd Bank is a Hinduja group promoted newer age private sector bank and is the fifth largest private bank in India.Vehicle finance forms around 30% of overall loansStrong pan-India presence with 5221 branches as on June 2021Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

IndusInd Bank: Steady Performance, Business Outlook Improving

External broker reports(aggregated public sources), HDFC Securities

HDFC Securities

HSIE Results Daily DLF: DLF surprised positively on presales at INR 10bn (6.6x/-5% YoY/QoQ) despite the lockdown during the quarter. While office collection remains robust at 99%, occupancy at DCCDL declined to 86% vs. 88% at Mar 21-end. The consumption of malls rebounded to 50% of pre-COVID level during Jun-21, with footfalls exhibiting a rising trend. With robust Q1FY22, DLF is well on course to achieve INR 40bn presales in FY22, aided by 8msf launches. Net debt also continues to trend down (INR 47.bn vs INR 49bn on Mar-21).<div class="content-highlight">Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.</div>

HSIE Results Daily DLF: DLF surprised positively on presales at INR 10bn (6.6x/-5% YoY/QoQ) despite the lockdown during the quarter. While office collection remains robust at 99%, occupancy at DCCDL declined to 86% vs. 88% at Mar 21-end. The consumption of malls rebounded to 50% of pre-COVID level during Jun-21, with footfalls exhibiting a rising trend. With robust Q1FY22, DLF is well on course to achieve INR 40bn presales in FY22, aided by 8msf launches. Net debt also continues to trend down (INR 47.bn vs INR 49bn on Mar-21).Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

HSIE Results Daily: DLF, Dr. Reddy’s, IndusInd Bank and More

*Earnings Appear Overstated: Bajaj Finance (BAF.IN) [Bajaj] posted FY 1Q22 results of INR 10.2 bn, declining INR 3.4 bn (25.6%) linked quarter driven by weakness in Consumer Financing. The loss provision increase of INR 5.2 bn (42.2%), which - despite the growth - still did not keep up with the pace of stated NPA growth; and *Time To Man Up:  The day of reckoning is coming for Bajaj as net new NPLs amounted to INR 193 bn at FY 1Q22 – increasing at 281.3% on an annualized basis. By our calculation, reserves (much of the portfolio is weak consumer credits) need to increase INR 157 bn - representing nearly three years of PBT and over 50% of shareholder’s equity. In other words, Bajaj needs to man up and start reporting losses – this is a troubled financial institution.

*Earnings Appear Overstated: Bajaj Finance (BAF.IN) [Bajaj] posted FY 1Q22 results of INR 10.2 bn, declining INR 3.4 bn (25.6%) linked quarter driven by weakness in Consumer Financing. The loss provision increase of INR 5.2 bn (42.2%), which - despite the growth - still did not keep up with the pace of stated NPA growth; and *Time To Man Up:  The day of reckoning is coming for Bajaj as net new NPLs amounted to INR 193 bn at FY 1Q22 – increasing at 281.3% on an annualized basis. By our calculation, reserves (much of the portfolio is weak consumer credits) need to increase INR 157 bn - representing nearly three years of PBT and over 50% of shareholder’s equity. In other words, Bajaj needs to man up and start reporting losses – this is a troubled financial institution.

India

IndusInd Bank Limited is a Mumbai-based Indian new generation bank established in 1994. The Bank provides a range of banking and financial services including  wholesale banking, credit monitoring, risk management, tele-banking, investment banking and commercial lending. IndusInd Bank operates branches throughout India as well as an office in Dubai and London.

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Indusind Bank (IIB IN)

CEO’s Coterie: IndusInd’s High Flying High Risk Takers Reap Rich Rewards But Negligible Penalties

The lesson to stakeholders: when times are good, senior executives will be richly rewarded, and when times turn sour on account of their...

Hemindra Hazari

HDFC Ltd – Just Getting Worse

HDFC: HDFC reported FY 1Q22 QOQ core result decline of 9.9%. Net new NPLs increased 65.5% annualized basis; HDFC’s reserve needs shoring up INR 83...

Thomas J. Monaco

IndusInd Bank: Steady Performance, Business Outlook Improving

IndusInd Bank is a Hinduja group promoted newer age private sector bank and is the fifth largest private bank in India. Vehicle finance forms...

ICICI Securities Limited

HSIE Results Daily: DLF, Dr. Reddy’s, IndusInd Bank and More

HSIE Results Daily DLF: DLF surprised positively on presales at INR 10bn (6.6x/-5% YoY/QoQ) despite the lockdown during the quarter. While office...

HDFC Securities

Bajaj Finance – Just BAFfling

BAJAJ FINANCE: Bajaj posted a QOQ FY 1Q22 results decline 25.6% driven by credit weakness in Consumer. Net new NPLs increased at 281% annualized...

Thomas J. Monaco

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