Bank-owned brokerages to show profit growth of up to 20% in FY22

Bank-owned brokerages to show profit growth of up to 20% in FY22

Bank-owned broking entities in India expect profits to grow by around 17-20 per cent in FY22 on account of increase in trading volumes, retail participation and margin funding.

According to rating agency Icra, the net operating income (NOI) of bank brokerages under its coverage may grow 20-25 per cent year-on-year (YoY) in FY12, supported by stable broking income and distribution businesses. The income profile may be further supported by the ramp-up of other capital market related businesses.


He posted an all-time high net profit of Rs 3,246 crore in FY2011, a growth of 79 per cent. Also, their capital market related lending business started after SEBI amended the margin funding guidelines. In line with the market rally, their loan book stood at around Rs. 7,300 crores from Rs. 227 crore as of March 2017, showing a CAGR of over 100%. This increased the share of interest income for these entities.

Bank brokerages leverage strong retail franchises. However, the ramp-up of digital initiatives remains important to sustain growth. They face intense competition from discount brokerages. The market share of bank brokerages in terms of transaction volume declined in FY2021 and further decreased in Q1 FY2022 as they continue to lose shares to discount brokers.

The cost structure and operational efficiency of bank brokerage companies have also improved over the years with focus on rationalization of branches. They have made cautious efforts towards transition to a digital business model, which has improved operational efficiency at the brokerage.

Icra said bank-brokerages are increasingly focusing on other non-broking sources of income such as capital market debt business, distribution income and investment banking revenue.

Samriddhi Choudhary, Vice President and Sector Head – Financial Sector Ratings, ICRA said bank brokerages under the rating agency’s coverage reported an estimated 28 per cent growth in average daily turnover (ADTO) in FY2011 from Rs 1.18 lakh crore to Rs 1.18 lakh crore. showed growth.

Despite the change in margin requirements, performance in Q1 FY2022 remained healthy with an estimated ADTO of Rs 1.64 trillion driven by favorable retail investor sentiment.

The Average Daily Turnover (ADTO) of the entire market increased to Rs 27.92 trillion in FY 2011 from Rs 14.39 trillion in FY 2010, registering an annual growth of 94%. Transaction volumes remain strong in the current fiscal, with an ADTO of Rs. 56.36 lakh crore in H1 FY2022.

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